If you are considering buying a rental property, here are a few tips that you should know first! Rental properties are a great way to make an income that, with the help of a property manager, can come to you passively. However, buying a rental home or apartment building may present challenges that are much easier to solve if you are well-versed in the rental industry from the start. Here are 5 tips that will help you out in this process!
- Down Payments
Some assume that buying a rental property can be as simple as agreeing to monthly payments then charging a tenant more than the monthly payment, essentially scoring a free home. Though you can eventually turn your rental property into a business that is making a profit, there are different steps you must take when purchasing an investment property. For example, you will likely need to secure a 20% or larger down payment from the start––we suggest reaching out to your bank or lender to find out what options you have available to you and what you may need to start planning for ahead of time.
- Calculate Cost & Know Your Margins
In order to successfully purchase and maintain a rental, it is crucial that you start out by running the numbers. What do you expect to charge for rent based on the current market value? What will your monthly costs be? Are you purchasing a property that needs any form of renovation? All of these are important questions to consider before buying your rental. Know the numbers, check them twice, then make your game plan and execute.
- Secure Insurance & Home Warranty Policies
As with your own home, having insurance and a home warranty policy that protect your new rental property is just as important. Homeowners insurance and home warranty policies vary, and it is always recommended that you do your research in finding a plan suitable for your needs. Some will cover property damage, loss of rental income, and liability protection. No matter what, make sure you and your rental are covered.
- Hire a Property Manager
If you do not want a rental property to function as your full-time job, hiring a property manager as soon as possible will ensure you can avoid spending too much of your time dealing with tenants and property upkeep. An excellent property manager will take care of the most important aspects of renting while keeping you completely in the loop.
- Consider Location
Location should always be considered when it comes to an investment property. Location can determine the price you’ll be able to receive for rent, the type of tenants you may rent to, and even the number of issues you may encounter. Look into what other properties in the same area sell for, what attractions are nearby, what amenities are included, and if the community has a Homeowners Association (HOA).
Whether you are in the beginning stages of purchasing a rental or you have just made the buy and now need guidance in obtaining a tenant, visit our website where we would be happy to help you with any questions you may have!