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Process Involved In Learning How To Invest Into Rental Units

Updated on April 21, 2014

Welcome: The Process Of Investing Into Rental Units

Learning to invest in rental units is very rewarding, but anybody who is considering investing in rental units will want to have an idea of what the investment process is like. Here is what the process is like, step-by-step. By the end of this article, you should have a good idea of what you need to do in order to invest in rental units.

Step One: Do Your Research And Make A Plan Of Action

The very first thing you should do is research a few things. You will want to research the different types of rental units in your area, as well as the area itself. You need to know what the crime rate is in the area, what the average rental price is in the area and how much of a profit (return on investment) you are hoping to get.

Once you have done your research, the next step is to come up with a plan of action. In other words, figure out what type of rental property you want to invest in, and come up with a dollar figure you are comfortable spending. For example, if you want to invest into an apartment complex, and you want to spend around $200,000-$250,000, then make sure you stick with that number and not get distracted by places that cost more than that. If you do this, then you can easily fall short of your investment goals.

Before you actually choose a piece of property, you will want to do the second step.

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Step Two: Get Financing

Before you actually choose a unit to buy, you will want to arrange financing. Too many investors have made the mistake of finding a place and then arranging financing. Sometimes this does works in the long run, but usually it is not the best move to make. The reason why is because sometimes an investor finds a property they like, and then they find out they cannot get approved for the funds needed in order to be able to buy the property.

You should also not make the mistake of not figuring out how much of a loan you can afford. You need to do the math in order to know how much financing you can afford, and if you are not 100% sure, then sit with someone at the bank and discuss your situation with them. They can help you determine how much you can afford, and then find out if you qualify for that amount.

Step Four: Make An Offer On The Place And Have It Inspected

Now is the time you will want to make an offer on the place. Once you and the current owner has come to an agreement, you will be given a close date. Once the closing date has been set, you will have a window of opportunity to have the place inspected, which will give you an idea of what type of condition it is in and if you need to repair or replace anything. Once the closing date arrives and you have paid for the place, then you will be the owner of a rental unit.

Step Three: Shop Around For A Place

This is the exciting part, as you will be shopping around for rental units to buy. By now you have been approved for a loan, so you know how much you can spend, and you know exactly what type of unit you are looking for. This means you just have to find the types of rental units you are interested in buying. There are many good ways to go about finding a place to buy, but the best thing to do is to shop around online. There are many websites that specializes in allowing owners of properties to sell to buyers/investors.

Once you have found a place you are interested in, you will want to move on to step four.

Finding Tenants And Other Information Such As Tax Breaks

You will need to find tenants, which is relatively easy to do, as you can pay to advertise in newspapers and online, or you can even rely on word of mouth.

The final thing you should know about are tax breaks available for rental units. As a landlord, you will have quite a few tax breaks available to you. First of all, if you have to make any repairs to your units, then the chances are you will be able to get a tax deduction as a result. If you have to travel for your rental activity, then that too can be a tax deduction, and this goes for both local and long distance travel.

That is the process that is involved with investing in rental units.

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