Are you preparing to invest in an Austin rental property for the first time?
Congratulations. You’re about to embark on a lucrative and rewarding experience. Once you successfully buy your first property, you may find yourself motivated to grow your portfolio into something really meaningful and profitable.
To have the best possible experience, you have to avoid the common mistakes that a lot of first-time investors make. You need to be prepared financially, find the right property, and surround yourself with experts who can help you make the right decisions and access the right resources.
Here are some of the tips we have for first-time Austin rental property investors.
Set Some Smart Investment Goals
Before you can begin investing, you need to know why you’re investing and what you’re hoping to accomplish. This requires a set of investment goals that you’ll use to guide yourself through the process of identifying properties, acquiring them, and then renting them out.
These investment goals are likely to shift and change over time. You’ll need to check in with them frequently. Don’t begin investing without them, however. Your goals should be Specific, Measurable, Attainable, Relevant, and Timely (that’s the S.M.A.R.T. acronym).
Each investor has different objectives when they begin buying rental properties. There’s no single road map to how to do this correctly. Maybe you’re investing because you want to fund your retirement. Or, maybe you’re hoping to turn your real estate investing career into a full-time business.
Create your goals, and put together some action steps to achieve them.
Gather Your Network Early
Surrounding yourself with experts is an essential early step when you’re investing in rental properties for the first time. Smart investors connect with people across the real estate and housing industries. You’ll want to begin meeting:
- Real estate agents
- Property managers
- Vendors and contractors
- Insurance agents
Don’t wait until after you have already purchased your first rental property. You want to learn everything you can prior to going in, and when you have a strong support system in place, you’re less likely to make mistakes and more likely to identify and pursue those opportunities that really make sense to you. Don’t try to do it all yourself. Rely on the expertise and the experience of others.
Educate Yourself on the Austin Rental Market
If you’re planning to buy rental properties, you need to study the rental market. It’s important that you understand what tenants are looking for, where the rental values are landing, and what kind of vacancy averages you can expect.
Market factors will always impact what you earn in rent, how you advertise your rental property, and where you find your tenants. Austin is an excellent rental market, thanks to the university, the growing local economy, and the number of people who are moving into town. You’re likely to have a solid pool of renters who are looking for well-maintained properties. You have to know what they want, though, otherwise, you could risk buying a property that’s left vacant for too long.
Spend some time studying other homes on the market. Take a walk through the neighborhoods where you’re likely to buy. Follow the rental prices. Talk to property managers in Austin who are reviewing applications, leading showings, and negotiating lease renewals. They can tell you what tenants are looking for and how much they’re willing to pay.
Learn the Local Rental Laws
To invest in rental real estate, you need to understand the requirements of renting out a property. You have federal laws, which include the Fair Housing Act, the Americans with Disabilities Act, and the Fair Credit Reporting Act. Those laws will dictate how you’re able to market your home, screen tenants, and accommodate people with disabilities.
You’ll also need to become familiar with state and local laws. The Texas Property Code has a lot of influence over your rental property. There are specific requirements for doors and locks and smoke detectors. You’ll need to understand the security deposit requirements and the eviction laws.
It’s a bit of a learning curve for new investors. Read everything you can. Talk to experts. Stay up to date on all the latest legislative actions and local requirements.
Figure Out Your Financing
There’s also the money.
You need to know how you’re going to pay for your rental investments, and hopefully, you’ve been mapping out a financial strategy for a while. Many new investors will expect to get a traditional mortgage when they begin investing. That’s a good option. Be aware of rising interest rates, however, and factor that into your calculations when you’re doing the math. Paying more every month for your mortgage will impact your cash flow. Can you afford that, or will you look for alternative financing options?
The money really matters regarding how you pay for your property and how you continue to pay for it even while rent is coming in and tenants are paying down your mortgage. You have to factor in what your costs will be, including maintenance costs, insurance, property taxes, advertising and marketing, and even variable costs like vacancy.
Budget conservatively. It’s better to pay less than you expected for services like pest control, roofing, and tax preparation.
Work with Austin Property Managers
Experienced investors work with Austin property managers because they treat their investment properties like a business. Professional managers can lease, manage, and maintain your home expertly and with a lot of tools and resources that independent landlords simply cannot access.
You can try to DIY the property management process, but if you talk to rental property investors, you’ll learn that professional management often delivers higher returns and lower costs. It also protects you from risk and liability.
We’d be happy to tell you more about how we can help you become a better real estate investor, even as you’re just getting started. Please contact us at Austin Landmark Property Services, Inc., CRMC ® –
A Certified Residential Management Company. We serve the Austin area and Central Texas including Travis, Williamson, Hays, Bastrop, and Bell counties.