Before you invest:
Stepping into the rental property market can be a great opportunity. These do’s and don’ts will help you know if it’s the right opportunity for you.
Do’s
Study the market – and yourself. Take time to answer the following questions. We’re not talking quick responses. Do the research.
What is the best type of rental for you and your portfolio? Rental properties include single-family homes, condos, multi-tenant buildings, vacation rentals, as well as office and business space. They vary in market demand, the amount of both financial investment and time investment.
Are you ready financially? How much of a down payment will be required? How much money will be needed initially to get the property available to rent? What are the fixed costs, such as property taxes and insurance? How long can you cover the mortgage payment w/o a tenant? It may take time to find one, or even if the property already has a tenant who wants to stay, they may leave later.
Are you ready to work with tenants? Whether you own a single-family dwelling or multi-unit property, or even an office, you will be interacting with people who will call about both legit problems and not-so-necessary issues. Sure, the ideal tenant pays the rent a few days early each time it’s due, keeps your property clean, takes care of the little details, and stays forever, but we don’t live in an ideal world, now do we?
What areas are the best location for the type of rental you are considering? For example, if you are looking at single-family homes, which school districts are the most popular, which areas have the closest access to parks and other family activities? Depending on your most likely tenant, you might want to consider access to public transportation, amenities, the office, or the industrial district.
Evaluate your finances. Real estate investments have proven to be a reliable way to build your financial portfolio, but if you jump in before you learn to swim, you can find yourself in deep waters without a life raft. Calculate all your potential expenses.
If you have extra funds for investment, first pay off debt aside from your home mortgage.
Determine the price range you can afford and save enough for a down payment.
When you begin searching properties, ensure you also have funds for closing costs, prepping the property for tenants, insurance, and covering the mortgage while finding a tenant.
Don’ts
Don’t ignore the do’s.
Don’t fail to seek professional advice. Discuss your plan with a financial advisor. Talk to someone who’s already in the rental market. Talk to a property management company – they know the ins and outs. Failing to get sound advice and putting your plan on paper hinders your chances of success.
Don’t go overboard with your first investment. It’s far better to start with a lower to mid-range property and learn the ropes before going for more significant investments.
Don’t ignore the market. While real estate is known to be a sound investment, it still has its ups and downs.
About Rentals America:
Rentals America is a family-owned residential property management company. It is our privilege to help landlords and residents navigate the rental market. Supporting our community is important to our team and each year we volunteer and donate to shelters and food banks through our Rentals America Cares program.
Questions? Contact us today.
