5 Steps to Purchasing Your First Buy and Hold Property

Buy and hold investing is one of the smartest financial decisions you can make in the current housing climate. With interest rates and home prices going up, home affordability is sinking lower and lower. This means that more people are turning to renting, and the landlords who own the properties are making money hand over fist. A buy and hold strategy can bring both excellent monthly income and a nice payout when you resell the property a few years down the line. If you are new to buy and hold investing, here are five steps to help prepare you for your first property.

• Network

One of your most important resources as a buy and hold investor is other investors. Find ways to meet and make friends with other investors. Seek advice and guidance from the people you meet. Having friends in your corner will help you avoid beginner mistakes and get a leg up in the often competitive rental property market.

• Figure out your finances

Before you even think about looking at properties, you should crunch the numbers to find out how much property you can afford and what you should reasonably expect to make. Talk to lenders about buy and hold real estate loans to help you leverage the capital that you have more effectively. It almost never makes sense to use a significant chunk of your personal savings to finance a rental property. You’ll need to put in some of your own money, certainly, but turning to a reputable lender for additional buy and hold financing will help you mitigate your risks and improve your chances of success.

• Research

Once you have a solid sense of the numbers, you can start looking for neighborhoods that make sense for your rental strategy. Look for neighborhoods that have overall low vacancy rates, where unemployment rates are low, and where you think you’ll be able to make the best returns. Don’t overlook neighborhoods that are outside of your immediate area. Remember that travel to and from your rental property is tax deductible and that you can always use a property management firm to handle the day-to-day operations of your property if it is far from your home (or even if it’s nearby).

• Expect the unexpected

Don’t let yourself be caught off guard by high property taxes or unruly tenants. Short term tenants can do quite a bit of damage. Try to find people who will stick with your building for at least a few years. Have money set aside for emergency repairs. You should also be financially prepared for your property to sit vacant for a few more months than you’d hope.

• Hire an accountant

One of the great benefits of being a landlord is all of the tax benefits. Find a good accountant early who can help you keep track of all of your tax-deductible expenses and make smart tax decisions. You’ll be grateful for your foresight when tax season arrives.

Once you do all of that, you’ll be ready to start looking for the perfect property.