The Rental Property Location and Acquisition Process

You’re ready to get started and buy your first rental property. You have the down payment for your desired price range, and you want to make an informed purchase decision.

Know your market area

Take the time to do a thorough analysis of your market area. You may have a specific neighborhood or area in mind, but you want to broaden your research to have the knowledge you need for comparisons of possible properties. Learn what properties are selling well in your price range. Do some research at the courthouse for areas where homes are selling for cash. Investors are the normal cash buyers, so you’ll know the areas other investors, some very experienced, are buying into.

Learn how to value properties

Learn how real estate agents do a CMA, Comparative Market Analysis. The first thing most successful investors will tell you is to buy below market value. This locks in a profit at the closing table. It also makes it easier to generate an acceptable profitable cash flow when mortgage payments are lower.

Analyze rentals and competition

Dig into the local media where rentals are advertised, both print and online in Craigslist. When you’re researching a neighborhood, get the average rental amounts for the type of properties you’re considering buying. How many are available, are owners offering incentives like free months? Know what you can expect for rent.

Nail down expenses

The expenses here are the normal ones like normal repairs (budgeted), real estate taxes, insurance, etc that will apply to every property in an area. A mistake here is just as bad as getting locked into a below-market rent for a year; throwing away profit. The condition of actual properties you are considering is a separate thing, though you will want to budget for obvious repairs you know will be coming for an older property.

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Locate the bargains and negotiate a deal

The next section will talk about finding the best rental property deals, but it is a part of this process that is crucial to long-term profit. If you’re paying retail, for the life of the ownership period, you’re losing profits.

Those are the pieces of the location process, but here are some specific sources for the best deals.

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