Investing in real estate and starting a rental property business attracts people looking for long-term equity in real estate with someone else paying the mortgage. Owning a property is the first step to being a rental property business owner. As attractive as this business is, the amount of money needed, the potential liabilities and the legal responsibilities are often overwhelming. Structure your early deals in a way to mitigate risk while getting more experience.
Leverage Your Existing Home for Financing
f you are looking for real estate to invest in, think about leveraging your own home first. You can do this in one of two ways: Use the equity in your home as a down payment for a new property, or simply rent out your existing home while you move into a new one. If you plan on staying in your home but want to tap the equity, you have a better chance of getting approved for a home equity loan compared to an investment property loan. Until you have rental experience, banks might give you less-favorable loan options on investments. If you plan on moving and want to rent out your home, you already have insight into the condition of the home and the desirability of the neighborhood. This makes it easier to rent.
Develop Financing Options and Business Relationships
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Over time, develop other financing options and business relationships so you can build a larger portfolio. This might start with an equity line on an existing rental and potentially include private investors.
Join a Real Estate Investment Club
Just about every city has at least one real estate investment club. Join and meet people who are already running successful rental businesses. You might be able to partner with some, splitting costs and risks. Either way, you will gain valuable knowledge and learn from others experiences by being part of the club. Most clubs also network property listings and have investor members seeking project partners.
Understand Rehab and Maintenance
