Congratulations!
You bought your first rental property. That’s the first big step towards building towards financial freedom. Hopefully, it was not just one property that you purchased, but a portfolio of multiple properties to help get you started in the right direction early. Especially if you a passive investor. More on that later.
You may be thrilled. You may be excited. You may even be a little apprehensive. There’s still a lot of work to be done. Buying a property is only the beginning of investing in real estate.
Even as a passive real estate investor, you have quite the road ahead of you! No matter if you’re investing locally or in a distant market, here are the next steps you for the best foot forward:
Steps for Real Estate Investors to Take After Purchasing Their First Rental Property
Line Up Your Property Management Team
Ideally, this was done before closing. Your most valuable asset as a real estate investor is your property management team. They are your public face and your best line of defense. You want your managers to be trustworthy and to be on your side! But you also need to remember that you are the owner. You are in control. You don’t need to be afraid of standing up to managers if you need to.
That said, this is the time to get on the same page with the management team that you trust. Sort out the details of your lease agreement together and work out the details that you need to work out. Decide what information you want from them each month, and just make sure you’re on the same page before things really get going.
Get Insurance
Again, ideally you already have your property insurance at the time of closing. However, there are other types of insurance to think about. Before you start renting out your investment property, get covered! There are several types of insurance you can look into: eviction insurance, fire and hazard, liability...there are other types as well, depending on what kind of investments you intend to hold. Either way, it would be wise to consult an agent and get covered before you get started.
Detail the Work to Be Done
If you didn’t purchase a turnkey property, you likely have some repairs or remodeling that needs to be done. Now is the time to make a game plan. While you may not do all of your renovations right away, you should plan for what needs to be done now and start contacting and comparing quotes from contractors.
Go ahead and take care of those repairs, boost your values, and have your property spruced up and ready to rent for your first tenant for the best price you can manage.
Solidify Your Debt Payment Plan
Unless you paid in all cash, you likely have a mortgage or other loan to repay on your investment property. You should have a plan for repaying it! You want to eliminate that debt in good time without letting it totally eat up your profits. You also want to maintain a good debt-to-income ratio in the event you need to take out a second mortgage for another rental property: it will help ensure that the bank approves you for your loan.
When you look at your finances, just make sure you have a solid, strategic plan to knock out your debts.
Start Thinking and Planning for a Portfolio Immediately
Assuming you did not purchase a portfolio to get started on day one. Passive investors can easily fall into the trap of thinking that their one property is the difference maker they have always wanted. It can be...yet, most likely it will only be a n expensive headache. We never recommend a passive investor purchase one property and then sit and wait. If you know that you have the right team. If you know that you want to be a passive investor. If you like the asset that you purchase. Then...you need to build a portfolio right away.
I would always rather see investors purchase a portfolio on day one. Multiple doors is always a better investment than purchasing just one property miles away and sometimes several states away from where you live. If you are going to make this investment, give it the best shot possible to succeed by purchasing a multiple single-family home portfolio.
Take Control
New real estate investors can easily fall into one of two traps: feeling overwhelmed and panicking or becoming far too passive and disengaged. As the owner, you can’t afford to do either. You need to be engaged, even if you are acting as a passive investor. Your strategies still need to be proactive. Anticipating problems, addressing issues, and stepping in when you need to step in. Will you always have to? No. But your managers should know to inform you of problems. You should be in the loop.
And ultimately, you and everyone should know that you are in charge and in control. Command your investments. Only you can direct their course. If you don’t take the reins and lead the way, who will?
Set Up Your Information Feed
A smaller but no less important step is ensuring that you’re staying informed. On a practical level, it means having your managers send you reports and updates on your properties. Beyond that, though, it means continuing your education! Are you investing in your future as an investor? Are you looking for mentors? Are you hungry for knowledge?
Start connecting with other investors. Start reading blogs and books and looking for new, good information about investment strategies. Now that you’re over one of the bigger hurdles and your managers are going to take care of the day-to-day details, you can breathe a little...but you can’t stop.
Don’t forget to nurture your mind and continue to grow!
Want to really get going in the right direction?
