6 Things to Know Before Buying a Rental Property
Do you think you have what it takes to invest in real estate and become a landlord? You aren’t alone.
According to reports, there are 10 million landlords in the United States. These numbers make rental properties one of the most popular ways to invest money.
If you’re buying a rental property in the future, you need to do your research, so you know what to expect. Below are six essential factors to consider when starting with rental property investment.
1. Location
Finding a great real estate deal is all well and good. However, it’s a problem if you buy a home where nobody wants to live.
If you want to be a successful rental property owner, finding the perfect location is essential. Look at the local housing market to see what the current activity is like. Is there an oversupply of homes, or is there a shortage?
The property should also be in a desirable location. Highly desirable areas include ones where many new buildings are being built and areas near schools and parks. If you have a home located near these areas, it will be much more likely to attract tenants who want to live in them.
2. Recurring Costs
There is a lot more money that goes into running a rental property than your mortgage payment. You need to consider the total amount of money that you will spend to keep it running.
In general, you should expect extra expenses in the first year that you buy a home. Many repairs are likely to pop up throughout the year, and you will also be spending money on cleaning and maintenance. However, these costs should taper off once you have your property running smoothly.
Try to budget more in the beginning than you think you’ll need. Doing this will ensure you have enough savings to account for any unexpected expenses. Once those are out of the way, you should have a better idea about your actual monthly costs.
3. Local Tenant Laws
If there’s one thing you can be sure of when investing in rental properties, it’s this: you’ll need to learn about a location’s laws before you think about buying a rental in the area.
Your state and local governments can both be very strict regarding rental property laws in their area. For example, some areas have laws that limit the type of tenant you can rent to, or they may insist that you obtain building permits and pay for a rental license.
You need to make sure that everything is legal, so read up on all of the rules within your area before you start renting out properties. Doing this will help ensure you are staying within the boundaries and regulations set by law. It will also help protect you from potential problems down the road.
4. Regular Maintenance
If you’re lucky, you found a rental property that’s in good shape. It won’t require you to be on-call all the time to fix constant issues. However, that doesn’t mean you will never experience issues.
You might have the time to do things yourself when you have one rental. However, what happens when you start managing several properties?
You’ll need help handling maintenance work if you want to have a life when your real estate business grows. You can do this by reaching out to the contractors in your area and start giving them work.
Start small with each contractor so you can test their skills. After you send people on a few test jobs, you should have a set of contracting companies that can help you keep your properties in shape.
5. Rental Management
As time goes on and your rental business grows, you’ll probably realize that you’re spending more time managing your properties than you want. If you’re going to treat your rentals as a business, you’ll need to learn how to delegate your tasks.
Your first option is to hire someone full-time to help. At a bare minimum, you’ll need an assistant. This is the person who will help you schedule appointments, take calls, and talk to contractors.
You can also use a local rental property management company to handle all of your properties. A management company will take a percentage of your rental income as payment but will manage all the business’s day-to-day operations. You can sit back and relax and let your management company handle the hard work.
6. Rental Type
While there are many rental property types, they all fall into one of two categories: single-family and multi-unit. Each type of property has its pros and cons.
Single-family rentals are the most popular type of rental units. They can be a low cost to buy and operate, but homeowners are limited by the number of renters each house can hold at one time. This means that you will need to rent out different houses if you have multiple available locations in your area.
Multi-family units, on the other hand, can hold multiple renters at one time. This type of rental property is often more expensive to buy and operate, but it allows you to use a single property for multiple renters. Using one house for numerous renters can often make your business run more smoothly in the long run.
Buying a Rental Property Isn’t a Decision to Make on a Whim
Many people hear about how rental properties provide them income every month without doing work. However, there is much more to owning a rental company than financial gurus will have you believe. Ensure you know what work you need to do when buying a rental property so you maximize your chance of success.
Are you interested in learning more about real estate? Head back to our blog to discover our best real estate tips and tricks.
