If you’re buying a Boston rental property for the first time, you’re going to enjoy a number of financial rewards with your investment property. There’s an opportunity to establish financial security, and if you’re smart about your investment strategies and your professional partners, you can build some long-term wealth. In the short term, you’ll earn money by collecting consistent rental income and keeping your property occupied with great tenants. You’ll also set yourself up for long term ROI as your Boston investment property appreciates and grows in value.
A lot of risk comes with owning rental property as well. It’s easy to make a mistake and there are often surprises. Sometimes, they’re expensive.
We love working with new investors because it gives us the opportunity to share our expertise and our resources. As experienced Boston property managers, we know what types of properties will rent for the most money and which properties will only be a financial drain.
Here are some of the most useful tips we have for new investors who are exploring their options with Boston real estate.
Establish Your Boston Real Estate Investment Goals
First, you’ll need to know what your investment strategy is and how much you can spend on a rental property. It’s alarming how many new investors skip this step altogether and just going looking for available properties to buy. You need to be more strategic than that. Buy the property that fits your investment goals and if you aren’t sure what those goals are – that’s where you need your starting point to be.
Here’s how you can decide what you’re really after:
- Are you hoping to earn immediate cash flow?
- Are you more interested in appreciation?
- Are you buying a rental property you plan to live in yourself one day as a retirement home or is this strictly an income property that you or your family members will never occupy?
These are some of the immediate questions you’ll have to ask before you invest. It will shape what you buy and in which Boston neighborhoods you decide to look.
Most investors understand that owning rental property in the current market is not a get-rich-quick scheme. You’ll have to invest more than money. You also have to invest time and resources if you want to build the kind of wealth that real estate promises.
You also have to prepare to invest for the long term.
Make some long-term plans. You may intend to start with one property, but can you eventually buy and hold a few properties and pay off the mortgages in a relatively short period of time? Or, will you be willing to take on more debt and leverage your additional single-family home investments to grow a larger portfolio over the next five, ten, or twenty years?
You’ll want to stay somewhat flexible because the market is in an unusual space right now and it can always change. Your investment property will perform differently from year to year. Be prepared to make the necessary decisions when the times come.
Financing is another early part of the equation and is an issue that should also be informed by your investment goals. Some of the questions you should ask before acquiring a rental property or finding the means to pay for it are:
- How much do you have for a down payment?
- What will you do to finance the rest of the purchase?
- How much risk can you tolerate?
- Do you have the available cash to spend on things like repairs, vacancy, and marketing?
Not a lot of first-time investors pay in cash. You’ll need to be prepared to budget for the expenses that come with owning a rental property.
Treat Boston Real Estate Investments like a Business
Real estate can easily become emotional, especially for new investors.
It’s important to detach from the property emotionally. In fact, do what you can to detach from the process if things become overwhelming and stressful. There are plenty of people who can help, and they’re not going to have the emotional connection that you do to an investment. Remember that this property is not a home to be occupied; it’s an investment with a single purpose: to earn money. Owning rental property is a business and should be treated as such.
Every decision needs to be made based on data, facts, and the recommendations of local investment experts.
New investors often don’t realize that it’s not necessary to fall in love with the property. Think about the asset as just that – an asset – and not a home. This will help you maintain perspective and emotional distance.
Focus on what the investment property should provide; consistent rental income in the short term and ROI in the long term.
Educate Yourself on the Boston Rental Market
Before investing, research is important to understand the rental market in Boston. There are nuances and trends from neighborhood to neighborhood, and those little differences aren’t always going to make sense. One home can have a vastly different rental value from another home that’s simply across the street and in a different school district.
You also need to be aware of the federal, state, and local rental laws that require compliance. It’s impossible for a new investor to know everything about the Boston market and its rental laws, but at least understanding the rental values, maintenance expenses, and vacancy rates for an area will help with budgeting and forecasting.
When you know a little bit about the market you’re about to enter, you can ensure you’re establishing a competitive and profitable rental value. You can also employ better marketing strategies for more effective leasing. Understanding competing properties will also help you prepare your own rental for the pool of tenants who are looking for new homes.
Depending on the property and the location, typical tenants may be families looking for good schools, professionals who want an easy commute to work, or retirees who will want access to recreational and entertainment activities. Understanding these details will drive important investment decisions.
Invest in the Right Boston Rental Property
If you are looking to acquire your first investment property in Boston, you have to make sure you know what you’re looking for, and what’s going to earn you the best ROI. You also need to consider how the property will fit your investment goals. It has to make sense mathematically, not emotionally because your rental property is a business, not a home you’ll be living in yourself. Consider your prospective tenants, who will be looking for a well-maintained home in a desirable neighborhood.
Many first-time investors make the mistake of buying a cheap property that needs a lot of work. This is a strategy that may have some merits for more experienced investors, but it’s not a great way to start your real estate investing career. The rehab that’s needed means there will be a delay in getting that property listed on the market.
Buy the right rental by doing a lot of research before you close on the deal. Get to know the rental value, the likely tenant demographics, the local economy, and the location. These things will impact what you earn and what type of investment experience you have.
Pricing Your Boston Rental Property for High Earnings
New investors are often confused about how to price their rental property. You probably have an idea about what you’d like your property to earn every month, but the rental price is really market-driven. It doesn’t matter how much cash flow you’re after or what you’ll need to make your mortgage and tax payments.
This is a difficult truth for a lot of new investors, but you likely will not see positive cash flow from your Boston rental property right away. It’s going to take some time. If you try to price your rental home at a point that you’ll earn a profit every month, you’re going to run into several different road blocks, the first of which is a long and expensive vacancy period.
Evaluate the market thoroughly and check the prices for competing properties that are similar to yours.
Prepare for Property Maintenance and Budget Accordingly
Every rental property will need work, especially once you have tenants in place. Wear and tear is going to occur, and systems and appliances will need to be repaired and replaced.
Prepare for this financially, and make sure that routine and emergency maintenance issues are a priority for you and your tenants. Any deferred maintenance or maintenance that’s left unreported by your tenants will damage the home and drag down its value.
When a tenant makes a maintenance request, respond to it right away, or at least let the tenants know when you’ll be able to take care of the problem.
Invest in Professional Boston Property Management
Unless you have the time, knowledge, and experience to manage an income-producing property on your own, hire a professional Boston property manager for your real estate investments. You need someone who knows the local market and understands the property management industry. Find a company that can accurately price the home, market it, and screen for highly qualified tenants.
If this is your first investment property, you don’t know how easy it is to make an expensive mistake. These errors are almost always unintentional, but they’re also avoidable. Renting out a home in Boston is more complex than ever. We can help. Contact us at Platinum Realty Group.