Now that the real estate market is on the upswing, more people are investing in the real estate market by purchasing investment properties to rent out. If this growing market has you intrigued, then the first thing you need to do is start searching for the ideal rental property.
How to do you spot the perfect property you ask? Here are the top six things you need to know about searching for investment properties before you call yourself a landlord.
1. Keep Location Forefront in Your Mind
There are different areas that are going to be more lucrative rental-wise. Areas heavily populated with college students or military families are always going to need rentals. If your target renters are families, don’t buy properties in a bad school district. No matter how great the house is, parents aren’t going to move into an area with poorly performing schools.
2. Beware the Property Taxes
Taxes on rental properties aren’t cheap. You might get a hefty tax break on your primary residence, but the IRS isn’t as kind towards rental homes. Before you buy a rental property, make sure you talk to your local tax assessor to get an idea of what the recent taxes were on the house you want to buy and factor it into your costs.
3. Review Loan Costs
You’ll have to have a decent down payment for a rental home. When you bought your house, you probably only had to put down 5 percent, but when you buy a secondary residence, you might have to put down at least 20 percent. The interest rates might be a bit higher, too, because banks aren’t as thrilled to be putting six figures down on a property that might sit unoccupied.
The ideal property is one that is affordable for you and your budget but has the potential to make you more. You might want to consider buying a fixer upper because the down payment and cost will be cheaper and it might teach you a thing or two about how to be a competent and frugal landlord. Speaking of which…
4. Learn to Fix Things
Learning common household fixes and repairs can give you a big leg up when you’re hunting for a great rental property. You will have the confidence to buy a more affordable home that needs just a few fixes if you know you can make the repairs yourself without having to hire an outside contractor.
If you can’t fix things, then you’re going to watch pennies fall through your fingers like water. It’s your job as the landlord to fix things as they break, and this can include heaters going out at two in the morning. If you aren’t a DIY type, then make sure you have the funds set aside for major water issues or electrical issues.
5. House vs. Condo
Houses tend to hold their value better, but condos are typically less maintenance overall. If you’re just starting out as a landlord, you might appreciate the ease of renting out a condo. There’s far less overall maintenance to be responsible for one, and you won’t be responsible for costly landscaping and exterior work.
You might also want to consider working with a property management company if you’re worried about the day-to-day responsibilities of your investment. To learn more about how a property management company can simplify your investment, read a bit about the First Team property management division.
6. Work With Professionals
The last thing you want is to be up the creek without a paddle when something goes wrong with renters. You’ll want to know all of your legal options if your tenants destroy your house or skip town without paying rent. A lawyer can help you draw up an ironclad rental contract to protect you if worse comes to worst.
Another professional you should strongly consider working with is a real estate agent. An experienced agent can spot a great rental property and might even have the connections to help you secure renters.
Once you get the hang of things, owning a rental property can be a great money making endeavor. If you have any questions about starting your investment, set up an appointment to meet with a real estate agent. A buyer consultation is free and a great way to start getting your feet wet. You can search for a local real estate agent online or reach out and we’ll connect you with a top agent in your neighborhood.
This guest post was written by Anita Ginsburg. Anita is a freelance writer from Denver, CO and often writes about home, family, real estate and finance. A mother of two, she enjoys traveling with her family when she isn’t writing.Informational credit to Doré Law Group.