Rental properties are in full swing and now is a great time to consider buying a rental property because most owner-occupied homes have already been sold over the spring and summer. We’re now left with a lot of homeowners that may not have sold over the summer and there willing to drop the price a bit.
You may find some great deals on a rental property right now but here are 8 Tips for Buying a Rental Property.
#1. Think long-term.
In order to be successful with a rental property, you have to look at the long-term outlook. Many people don’t hold onto a property long enough to actually make it worth their while. If you break even on a cash flow basis and you continue to do so, you can still be garnering equity and appreciation on the home. But if you’re looking to make money, you need to think long-term.
#2. Be cautious of the law.
If you plan on having a rental property you have to be aware of the current laws. This isn’t as simple as collecting money and providing maintenance. There’s bookkeeping involved, security, tenant issues, potential property management, and if you don’t follow the laws tenants may sue you so it’s important to know your rights and stay above the law.
#3. Make sure you’re landlord material.
Are you ready to be a landlord? What about hiring a property manager? Are you willing to do the work necessary to maintain or upkeep the home? Are you comfortable with staying on top of tenants that may not be paying or are you comfortable with evicting someone?
#4. Should you buy cash out or finance?
You don’t need a bucket of cash to invest in a rental property. Financing may actually be the best option but it’s important to talk with a lender that understands both sides and can help you run the numbers to see what makes sense for your financial future.
#5. Budget for the unexpected.
Don’t max out your budget thinking you’re going to get this bucket of money every single month. As a landlord, you’ll want to save up to 30% of your rental income for upkeep, maintenance, replacements, and emergencies.
#6. Don’t forget the lease.
Many first time rental property owners forget to renew their lease in this means the tenants will go on a month-to-month basis. This might sound great but it also puts you in a situation where your tenant can leave at a moments notice and you’ll be stuck finding a new tenant quickly.
#7. It truly is about location.
That old real estate mantra is definitely true when it comes to rental properties. Sometimes the best locations with the most appreciations have the worst cash flow on a rental. You have to find where a rental makes sense for not only you financially but your tenants as well.
#8. Don’t forget property tax.
There are a lot of tax benefits to a rental property, meaning that you can write off just about everything from painting the home to changing light bulbs. It can be a great way to gain a little more on your property tax return or not pay as much.
Buying a rental property is a great option but it also means having the right agent to help you navigate the situation and find the right property. Not every property makes a great rental property. You want something that will be a great return on your investment and will provide income for you for years to come.