Do you want to escape the daily grind and build real wealth? Investing in single-family rental properties might work for you if you do it correctly. Knowing that many of us are not born into families with million-dollar trust funds or have wealthy sponsors, it can be a challenge to come up with the amount of money needed to get started with your first rental property. The good thing is that, with the right information and careful planning, you can take on that challenge. Now, let’s take a closer look at how much money you need to come up with to buy your first Petersburg rental property.
Of course, to buy a rental property, you need a cash down payment. If you are a residence-owner, most lenders require a minimum of 20% down, sometimes 30% in certain situations. If this is your very first property purchase, you might be able to get a conventional loan with 15% down. This is the absolute minimum required under Fannie Mae. What usually happens is that a lender lends you up to 75% of the property’s purchase price, leaving you to look for the other 25% as a down payment.
Aside from the down payment, you also need to have cash available to pay closing costs. These costs can range from loan origination fees, appraisal and home inspection fees, mortgage insurance, title insurance, deed recording fees, property taxes, and notary fees. You must remember that closing costs on an investment property could be more than what you’d expect to pay for a primary residence. Experts peg closing costs at 3% to 5% of the purchase price.
Closing on your first rental property investment is just the beginning. As soon as you acquire the property, you have to spend some more to get the property ready for your first tenant. This is true even if your rental home is new or in very good condition. The renovation and repair costs will depend on the state of your property. However, most investment properties need a minimum of new paint, new carpeting, and getting the major systems inspected and serviced.
Now that your property is ready, there are a few more initial expenses you should expect. These are usually called “operational” expenses since they include things that form part of the regular operation of your rental property. For example, you’ll need to photograph and market your property, pay for background checks on applicants, prepare good quality lease documents (typically with the assistance of an attorney), set up accounts to hold the security deposit and rent payments, and so on. You also need to keep a budget for your fixed and variable property expenses since you could be paying for them before you get your first rent payment. Taken individually, these expenses aren’t large, but they do add up. This is a good reason to set aside enough cash so you can efficiently launch your rental property.
You should also consider hiring a good Petersburg property manager who can handle the day-to-day tasks a rental property requires. Unlike what most people believe, property managers can help you save money by providing the conveniences, tech, and services that you would have to pay for anyway, plus take care of maintenance calls and tenant relations as well. Contact Real Property Management Empire today to learn more about how professional property management can help you get your investing career off to a great start.
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