Are You Ready For A Rental?

Purchasing a home is a big deal, and it’s an even bigger deal when the home in question is a rental that you don’t plan on living in. With this type of investment, you’re putting in a lot of money and time and hoping and praying it pays off, but there’s no guarantee it will. Before you make this type of commitment, and you need to make sure you’re ready for it. Ask yourself these 4 questions before moving forward with a rental investment.:

1. How’s your personal financial situation? Your finances need to be in good order before you should even consider purchasing a buy-and-hold rental. This means having minimal debt – and especially bad debt, such as credit cards or massive student loans. If you are debt-free, even better. You’ll also want some cash or other liquid assets that you can use for a down payment, as well as emergency funds for anything that goes wrong with the rental. This could be in the form of unexpected repairs, vacancies, etc. Excellent credit is another factor that indicates you are in a good financial position.
2. Are you committed to learning and growing? No investor will ever reach a point where they know it all. This is impossible because real estate investing is a world of constant change. Even when you think you finally have a good understanding of how everything works, something new will happen. With each deal you make, you will be learning – and you need to be committed to absorbing this knowledge. If you don’t consider yourself a lifelong learner, then this type of investment may not be for you. You also need to accept the fact that you will make mistakes and encounter failures along the way, but it’s how you respond to these moments that will determine your success. Only when you can learn from them and move on will you achieve growth as an investor.
3. Where does rental property fit in with your financial goals? The only reason to invest in rental property is to improve your short- and long-term financial situation. That said, you should have some financial goals that you’ve set for yourself. Maybe you want to retire at 50, or maybe you want to be a millionaire by 40. Whatever your goals are, examine just how rental property fits in with them. Will a rental help you achieve them? How so? If you can’t find a connection between purchasing an investment property and meeting your financial goals, then you aren’t ready for a rental.
4. Is now the right time? Timing is everything in real estate investment. Take a look at your life and consider how owning a rental property will impact it. Specifically, you need to think about how much time purchasing and managing a rental property will take, and if you will be able to supply that with minimal difficulty. While you may reach a point where your property only requires a couple hours each week, this will definitely not be the case in the beginning. Before you even purchase, you’ll spend a significant amount of time researching properties, locations, running numbers and calculations, and learning all you can about property investment in general. Even after you’ve bought a home, there will still be time devoted to it each week. Are you ready for that?

Investing in a rental property is not something you want to just dive into. There’s a lot of groundwork to cover beforehand, and you need to make sure that you are in a secure position first, both financially and in your personal life. Ask yourself the questions above to more objectively analyze your unique situation before you invest and decide whether or not you are ready for a rental.