Entering the real-estate market for the first time takes a considerable amount of courage and ambition. But diving headfirst into unknown waters is never a great idea. Any investment, especially into property, is going to carry some risk; however, that courage and ambition will be your guiding light that leads you to informed decisions. Before you take your first steps you need to ask yourself or someone else: “What are the best rental properties for new investors?”
Anybody who is actually trying to help you will tell you to weigh your options and analyze the risk involved. Your risks will involve your start up cost, location, and the specific real-estate market you are willing to enter. There are also some personal variables that need to be taken into consideration such as your personal budget, venture capital, or ability to attain credit.
If your credit isn’t the best or your budget is limited, your best place to start is small properties. Also, if this is your first venture into the real-estate market, it will benefit you to invest in low risk properties and learn the ins and outs of the market in the meantime. Unfortunately, the general trend for lower risk properties tend to have lower returns than successful high risk operations, but, of course, results will vary.
Rental units, specifically mobile homes, are a great place to start. Owning a sizable plot of land is an advantage over your competition who may not already own land. Owning land also may award you credit from banks. Adding a few mobile homes to your property and renting them out is relatively low risk in terms of upfront cost. During this period, you can see how you enjoy being a landlord and observe the behavior of tenants. When you are a landlord of a particular property, you are not only just the owner. You are also the manager of said property. This means repairs, additions, and other maintenance needs will fall on you.
Mobile homes may be relatively cheap, but they are often poorly constructed unless you are going with higher end units. This makes the homes susceptible to extreme weather conditions such as fires, tornadoes, high wind, or hurricanes. Your location should play a factor into which kinds of properties you purchase as these environmental threats are higher in certain locations. Insuring your properties may also be a good idea as added protection of your investment. Assuming all goes well and you pay off your mobile homes in a timely fashion, you can start to make significant returns on your investment.
Climbing the Ladder
Having successful ventures in the past makes you less of a liability to banks if you want to expand or move on to bigger and better things. Paying off your properties on time will do wonders for your credit, possibly allowing you to borrow larger sums in the future. Use every opportunity as a stepping stone to improve yourself as an entrepreneur to get ever closer to your real-estate goals.
Investing in small commercial properties for potential business owners to rent out is another great place to start your real-estate career. Keep in mind, I’m not talking about anything extravagant like a car dealership, but rather a small shop perfectly fitted for a mom and pop small business. Your initial startup cost will again depend on the location and the size your property. Also, owning the property your building sits on will be advantageous. But of course, it is yet another added expense.
However, owning these type of properties can yield more revenue than entry level housing rentals like mobile homes. Investing in a strip of properties in a great business location can yield great rewards. Although when dealing with businesses, you need to be ever vigilant with the vetting of your potential tenants. You need to evaluate the business model of your potential tenants to see if their plans are sound. Also running a credit check would be advantageous to make sure they have a solid record of paying their debts, and if their business fails they have the means to pay you for rent. Like in any real-estate situation, any one tenant won’t do, especially when you start investing more money.
Reaching the Top of the Ladder
Climbing the real-estate ladder is a process not to be taken lightly. Hundreds of thousands of dollars or more could be on the line, and making sure that investment pays off should be your top priority. New investors need to erase themselves into the market and not rush in blind. Managing small properties is a great way to get a feel for more involved ventures in the future. As you grow and learn in the market, more opportunities well arrive for you to take advantage of, but skipping steps is not an option. Take your time, explore options with minimal risk, and lower start up cost. Most importantly have fun! If real-estate does not provide the hint of a trill or excitement, then this market is not for you. There is no way you can be successful at anything if you are not enjoying what you are doing. I am not saying there will not be any hurdles to cross, but at the end of your day’s work, you should be able to confidently say it was all worthwhile.