Owning rental properties is a great way to build long-term wealth. Plus, once your home is ready to rent, it’s a mostly passive source of income. However, this doesn’t mean it’s a decision that you should make lightly. Buying your first investment property is a big deal, so you want to put some careful thought and planning into the process.
Managing Your Property
One of the first things any investor should consider before even looking at properties is how you want to manage it. Some first-time buyers assume they will do everything themselves without fully realizing what is involved. As long as you don’t live far away, it’s possible to keep up with everything yourself, but doing this takes up a big chunk of your time.
We recommend looking into hiring a rental management company that specializes in helping take care of Phoenix investment properties. A reputable company such as Turnkey will handle all the details, from keeping it professionally cleaned between guests to providing round-the-clock local support and keeping you up to date on bookings. This way, you’re always in the know, but the bulk of the work is off your plate.
Determining Your Budget
Even if you already have a general idea of what you expect to spend on a rental property, remember that what you factor into your budget for an investment is a bit different from what you would spend on a primary home. You want to consider not just what you can afford but also how to maximize the return on your investment (ROI).
Investopedia explains that your ROI will depend on how you purchase the property (cash or financed), and it also includes the amount you can expect to earn compared to the costs involved. In addition to the price of the property, don’t forget about additional expenses like maintenance, taxes, utilities, and insurance. Of course, choosing the right home that’s in a desirable location, and keeping it rented consistently, will make a big difference in your bottom line as well. After running all the numbers, it’s always smart to buy under budget to leave room for expenses you may not have accounted for.
Finding the Right Location
Location is the name of the game in real estate, and this is especially true for vacation rentals. Not only do you want to buy in a general area that’s popular with visitors, but hyper-location is just as important. For example, if you’re searching for a property in Phoenix, start by thinking about what kind of activities people visit for, and look for a location that meets those demands. If you want to cater to tourists coming for the natural scenery, look for a location that’s near trails, and especially one with a beautiful view. If you want to cater to those visiting Downtown, an ideal location is one that is within close proximity to the most popular spots.
Investing in Amenities
Amenities are easier to add or change later than a location is, but they should still factor into your home search. One way to get an idea for which home features guests want most is to read up on what travelers are searching for. For example, Well and Good cautions travelers to be aware of noise levels, so this is something to consider if you’re looking at a condo that has shared walls or any property that’s in a busy neighborhood. Another smart way to think about the location is to consider what vacationers want in a specific area and how your property stands out. One example is the benefit of having a pool, which is a nice feature that will set your property apart.
This is an example of how the popularity of vacation rental homes is good for investors, but it can also have drawbacks. These properties are in high demand, but that means you have to make sure yours is one that people really notice. As long as you keep these top tips on your search list, you can be confident that your investment will pay off.
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