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Owning investment property, such as a rental house, is a smart way to earn income while watching an investment grow in value. Rentals make great investments because the cost of ownership remains relatively flat but rents increase over time, meaning that your annual return should grow the longer you own it. In addition to short-term profits, the property’s value should grow while your debt shrinks, meaning your equity grows over time.

Here are the key steps in buying a smart investment:Think Real Estate

  • 1. Understand why you want an investment property
  • Spend some time analyzing why you want to own an investment property so that you find the ideal property for your needs.
  • 2. Analyze the financial risk and return
  • Take a good look at your budget and make sure you have a cushion to pay for anything that might come up. Have reserves so that you could pay the mortgage for several months, even if you don’t collect rents for some time.
  • 3. Learn the law
  • There are plenty of resources to help you understand landlord-tenant law. Organizations such as the Rental Housing Association of Greater Portland (www.rhagp.org) offers courses and online resources to help you understand how Fair Housing and other important laws work.
  • 4. Search for a property
  • Your realtor should help you to analyze and understand the financials so you can make an educated decision. This might include preparing a budget for improvements, so your realtor should be able to help you determine what improvements are needed and how much they will cost.
  • 5. Make any needed improvements
  • Once you buy a place, you will want to take care of any deferred maintenance to protect your new investment. Go through the inspection report with a fine-toothed comb and make a plan.
  • 6. Screen tenants extensively
  • Once you are ready to find your own tenants, you should diligently screen applicants, following the law. This means checking references, pulling credit, and running a background check.
  • 7. Track your budget and keep a calendar of important dates
  • You’ll need to track your income and expenses for tax purposes, but this also lets you keep a handle on the financials and see how they trend. Make sure that your rents don’t dip below market rates, which often means making small increases so that the rent doesn’t fall behind.

About Think Real Estate
Think Real Estate is a full-service real estate brokerage, built on the premise that knowledge and information are the keys to making smart real estate decisions. Our company is built on a foundation of shared expertise. We are a collection of experienced agents collaborating in an open environment, constantly educating each other.

Through our broad backgrounds working with many different types of clients, Think agents can clearly communicate complex information, and tap into their knowledge to help negotiate successfully and efficiently. Whether working with a first-time homebuyer or a savvy investor, Think agents provide expertise with ease.