Buying your first rental property in Chicago might be easier than you think. People get involved in real estate every day, some without much knowledge or capital. The opportunities are there if you know where to look! Learn how to get started with Chicago real estate investing in our latest post!
Set Your Goals
It is important to know what you are trying to achieve and what it will take to get there. Why are you investing in real estate and what are you hoping to achieve? You’ll want to consider dollar amounts and timeframes. How much do you need to make and how quickly do you need to do it in order to feel successful? Set your goals and take the steps you need to make to get there. Make sure everything you are doing is in alignment with these goals and you will be well on your way.
Pay Off Your Debt
As a first time investor, you don’t want to go into your investment career carrying any debt with you. While some more seasoned investors will use their debt as an asset, this isn’t the way you want to begin. You’ll need a clean slate, some money in the bank, and a solid credit score to get your foot in the door the traditional way.
Save For Your Down Payment
You’ll want to save up at least 20% for your downpayment as well as six months of operating costs. While there are other financing options you can use to avoid the hefty down payment, but those are usually best for more experienced investors who will be able to pay back these high-interest loans more quickly.
Get Your Financing In Place For Your First Rental Property
If you are financing a portion of the cost to purchase the property, make sure to have this in place before making offers on available properties. You will likely have competition from other investors who have cash in hand, with the ability to close quickly. Don’t let your lack of funding cause you to miss out on a great deal.
A fixer-upper can be a great investment, but maybe not for your first go-around. Repair costs can snowball and unless you are working with a contractor you know, trust, and who does great work at a low price, buying a fixer-upper as your first rental property may get you in over your head. Fixer-upper properties are better left to people with investment experience or construction background.
Know The Costs
How much will owning the house cost you? Consider the property taxes, insurance, maintenance, and inevitable repairs. As the owner of a Chicago rental property, you will find yourself paying for much more than just a mortgage. You’ll face other costs that a regular homeowner wouldn’t face. As a landlord, you will also have to think about things like tenant screening, eviction costs, and paying all the bills when you are in between tenants.
Choose The Right Location
Location, as they say, is everything. A house can be remodeled, repairs, or completely knocked down and rebuilt. However, your location is permanent. The area you choose for your rental property will have a massive impact on your profit potential. Look for houses priced under market value in up and coming areas. Look for places where there are new businesses and establishments popping up. When a Walmart, Costco, or Starbucks enters the neighborhood, it’s a sure-fire way to know that an area is growing.
Pay The Right Amount
Nobody wants to find out they have overpaid for a property. Overspending on your rental property will end up costing you and will taint your view of real estate investment as a whole. While everyone makes mistakes, making a real estate mistake can be one of the worst. If you do your homework, have taken the time to learn from other investors, and have built a great team around you, you will feel confident that you are not overpaying. Preparation will help you to pay the right amount for your real estate investments in the Chicagoland area.
Find The Right Tenants
Once you have made your purchase, it is important to find the right tenants to get the returns you need. Having the wrong people in the house can make any profit you had expected to receive, vanish right before your eyes. Tenant turnover, repairs, evictions, and missed rent are all huge factors when calculating your overall profits. If you aren’t having luck finding the right tenants on your own, consider hiring a property management company to help you. Many companies will offer different levels of service, helping you only with getting the tenants in the door if that is what you need. Of course, their additional services can come in handy as well.
When you decide to buy your first rental property in Chicago, get in touch! We’re ready to help you! (800) 953-2124