While investing in single-family rental property can often provide robust and consistent cash flow, owning rental real estate can take a significant amount of time and effort.

Obtaining financing, understanding rental property performance metrics, finding a rental property, tracking income and expenses, and, for some, hiring a dependable Branson, Missouri property management company are all parts of the process of purchasing your first rental property. This article will teach you how to buy a rental property in six simple steps, as well as some of the benefits and drawbacks of investing in real estate.



Make financial arrangements

●     Financing a rental property differs from applying for a mortgage on a primary residence. Down payments are larger, lender fees and interest rates are slightly higher, and there are different qualification requirements:

●     According to Experian, a credit score of 720 or higher is required for the best loan terms, though purchasing an investment property with lower credit is possible.

●     Copies of tax returns, bank statements, and proof of income are examples of borrower documents (similar to applying for a loan on a primary residence).

●     If periodic income is lower or expenses are higher than expected, lenders may require up to six months of mortgage payments to be held in a reserve account.

Understand rental property returns

A reputable Branson, Missouri property management company will help you understand rental property returns. To calculate the return of investment of a property, an investor needs to know the following:

●     Calculate your annual rental income, including tenant rent and any additional income, such as pet rent.

●     Determine estimated annual operating expenses, such as repairs, property management fees, insurance, and taxes.

●     Estimate yearly cash flow by deducting expenses from income.

●     Decide on down payment and any other upfront cash (such as needed repairs)

●     Determine R.O.I. by dividing annual cash flow by the total amount invested.

Locate a rental property

Some of the most important factors to consider when selecting the best rental property and real estate markets are as follows:

●     Local job market and growth of population

●     Percentage of renter-occupied households

●     Rising rent prices and declining vacancy rates

●     Historical change in home values may lead to long-term appreciation.

●     Neighborhood rating, including school district quality and employment rates

●     The potential for a turnkey single-family rental property with a tenant already in place (or a rent-ready home) helps reduce investment risk for first-time buyers.

●     Property tax rates can vary dramatically from one city and state to the next and impact potential R.O.I.

Hire a reputable property manager

Being a landlord can take up more time than it appears. Finding and screening tenants, collecting rent, and taking care of repairs are just a few of the responsibilities that come with successfully managing a rental property.

To keep operating expenses under control and the rental property returns growing, owners must also comply with the Fair Housing Act's local and state landlord-tenant laws, conduct periodic property inspections, run regular rent comparables, and obtain the best prices from qualified vendors.

Hiring a reputable Branson, MO  property management company may allow an investor to reap the benefits of owning rental property while avoiding the responsibilities of a landlord. The best rental property managers handle the day-to-day details, allowing investors to focus on increasing passive income streams by purchasing rental property in the best markets for the best returns.

An experienced Branson property management company should be carefully vetted to examine:

●     That they have the proper licenses and those licenses in good standing

●     Historical portfolio performance

●     Length of time in business

●     Reporting and data capabilities

●     Fee and pricing structure

Track income and expenses

Keeping track of rental property income and expenses can quickly become overwhelming, even for experienced real estate investors. The following are examples of common income and costs that affect the return on a rental home:

●     Rental income

●     Security deposit

●     Other income (pet, storage, laundry, roommate, etc.)

●     Leasing fees

●     Property management fee

●     Repairs and maintenance

●     Landscaping

●     Pest control

●     Utilities (sometimes found with small multifamily properties)

●     Mortgage payments

●     Insurance

●     Property taxes

●     H.O.A. fees

●     Depreciation expense

●     Owner expenses (such as traveling to an out-of-state property)

While it is possible to keep track of income and expenses with post-it notes, cocktail napkins, or a series of spreadsheets, savvy real estate investors frequently enlist the services of a reputable property manager to oversee the expense tracking of their Branson rental apartment or home.

Alternative strategies for buying your first rental property

Finding funds to make a sizable down payment on a rental property is becoming more difficult in some real estate markets as housing prices continue to rise. Fortunately, there are several less expensive strategies for purchasing a rental property:

●     Renting out a room in your home, then using the extra income to pay down your current mortgage to save for a down payment.

●     As a joint venture, partnering with another real estate investor to purchase a rental property can also reduce the amount of cash required to buy a rental property.

Real estate investing necessitates a long-term perspective. This guide will teach you how to analyze real estate deals. Before deciding what and where to buy a rental property, carefully examine each real estate market and the key points of this guide.

Thousand Hills Realty is the premier property management company in the Branson, Missouri Tri-Lakes area. If you are contemplating purchasing your first rental property in the Branson and Hollister areas, call us today at (417) 337-8081. We would appreciate the opportunity to discuss how we can put our expertise to work for you.