Many young people feel like owning rental properties is a wise financial decision, but they don’t know how to get started.
Today we feature one of Shine Realty’s real estate agents, Aidan Hill, who shares how he purchased his first rental property at 20-years-old.
Now 23-years-old, Aidan owns two real estate investment properties and plans to buy several more.
Here are some of his tips for getting started with becoming rental property owners:
Save Money, Cut Spending
Like many young people, Aidan went to college. He and a roommate got tired of paying rent. They both decided to move back home and save as much money as they could. Their goal was to try their best to buy their first investment property in the fall.
They succeeded!
This took:
- setting a clear goal
- discipline
- sticking to their priorities
It’s easier to say no to things like paying rent, eating out, or taking a weekend trip when you have a bigger financial goal in mind.
Talk with a Knowledgeable Lender
Getting financing for an investment property is significantly different than getting a loan for a personal residence.
Talking with a knowledgeable lender can help you get on the right financial path for real estate investing.
We have a list of recommended local mortgage lenders; Diane Rue and Amy Fosdick are two we can recommend for investing loan questions.
Have Realistic Expectations
Notice, they weren’t able to buy a turnkey home (one able to be immediately lived in). Having this realistic expectation is important.
Online platforms like Pinterest, Instagram, and TV Shows on HGTV have given many people unrealistic expectations.
In one of the duplexes, they had to redo an entire unit!
Learn “HandyMan” Skills
If you don’t have a lot of experience with “handyman skills,” you might want to start learning.
Dedicating even an hour per day learning from someone who is handy or someone on YouTube can help you grow in this important area.
You’ll need someone with maintenance and building skills to:
- fix things
- properly install things
- and make improvements on the property
It’s hard to make a profit from owning rental properties if you have to hire out all the maintenance and improvement jobs.
Work Hard
Owning rental properties and flipping houses is not easy. It takes hard work!
In one duplex, Aidan and his business partner:
- Replaced all the carpet
- Painted
- Replaced the shower
- Replaced the toilet
- Replaced the bathroom sink
- Replaced the kitchen sink
- Replaced the kitchen floors
- Replaced the doors
- Added carpet to a room
- Added a window to a room
- Added a heat source
Being able to do a lot of this work themselves took time and hard work, but they saved a lot of money by not hiring others.
If you need to hire contractors or find a vendor for a specific job and you’re in the Southern Wisconsin area, check out our list of Wisconsin Contractors & Suppliers.
Calculate the Return on Investment
While Aidan’s business partner provides more of the handyman skills, Aidan brings more of the business and calculation skills.
When you’re getting started with rental investment properties, you’ll need to calculate the return on investment (here’s a rental property calculator).
This answers questions like:
- How much will the property cost to purchase?
- How much will the repairs/improvements cost?
- How much will the property cost to maintain?
- How much will you be able to charge for rent in that area?
- Will the rent you collect be more than the cost of ownership/maintenance?
The rent Aidan collects is more than the mortgage and ownership costs, making these successful real estate investment properties.
Curious to learn more about investing in real estate? Check out the Bigger Pockets Real Estate podcast.
Find People Who Are Similar But Have Different Strengths
If you want to get started owning rental properties, especially at a young age, Aidan recommends finding people who are similar to you but have different strengths.
He’s found having someone who is handy and gets things done pairs well with someone savvy at calculating real estate costs and expenses.
This helps to ensure you choose a property with good potential for your situation.
Diversify Your Income
The old saying, “Don’t put all your eggs in one basket” is a popular saying for good reason.
Adding real estate investment properties like rentals can be a great way to diversify your income.
Invest Wisely
Real estate is a tried and true place to invest your money. While things like vehicles generally depreciate or lose value over time, real estate increases over time.
The average U.S. home value was $126,000 at the turn of the century. In 2020, that figure was $259,000, an increase of 106% in just 20 years (source)!
Since 20202, home values have continued to rise, and both home prices and rent are expected to continue to rise (source 1, source 2).
Since the value of real estate grows over time, real estate is a great option to invest your money.
And how many people have you heard say they wished they had purchased 5 or 10 years ago?
There’s a good reason for that.
Real estate owners know how fun it is to watch the value of properties grow over the years.
Questions About Getting Started with Real Estate Investing?
Get in touch with Aidan or any of the other Shine Realty realtors. We love real estate and helping.
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