Buying a rental property is not a decision any investor should rush. Too often, the saying, “all that glitters isn’t gold,” manifests when a landlord makes a wrong purchase. One of the many ways to earn more money in the real estate business is to acquire the right property.
In this article, we’ll be highlighting 3 essential factors you should consider before looking for rental housing. So if you want to make a wise purchase on your first or next investment, keep reading.
The location
Location is one of the foremost considerations for investors when looking for a new acquisition. You can think of it as the foundation that connects other considerations.
For instance, if you’re leaning towards buying a vacation rental, you’ll want somewhere that’s a hot tourist spot. The more traffic the place gets, the more profit you stand to earn. Furnished apartments thrive well in areas with a younger student or working professional market over suburban family concentrated regions.
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And also, some municipalities are more lenient with property taxes than others. So location is a multi-faceted consideration that affects your tenant market, your costs, and the profit you stand to make.
Make time to do your research and mark out the neighborhoods that meet your needs. You can always hire a real estate manager to help. Ask questions like what public amenities are nearby and the tendency for a property to appreciate in this area.
If you find it challenging to keep up the transit or have too many properties on your hands, you can always hire a local property manager to help you.
As folks from Faranesh explain, not only do they have the expertise to make sure you get the best deals, but also take a lot of stress off your plate. But you have to research the property management company first to ensure they deliver quality services.
The Cost
Another angle to consider when it comes to investing in rental housing is the cost. Yes, real estate is by far one of the most reliable investment strategies out there. But it’s also on the expensive side. The last thing you want is to make financial commitments you can’t see through.
When considering cost, the question on your mind might be, “can I afford the property?” That’s right because financing a house is one of the biggest financial hurdles in owning a rental property. Be sure to explore the options you have.
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Most people use a conventional bank loan, but you might struggle with getting approval if you have a low credit score. Private lenders, seller financing, and home equity are other routes you can consider if you’d still like to make a purchase. Don’t forget to factor in renovation costs.
Of course, financing is only part of the equation. A savvy investor knows that charges are a vital part of your overall cost. Earlier, we mentioned property taxes. Find out the price range for your type of house and rental arrangement in the municipalities you’re interested in.
If you plan on providing amenities such as water, heat, Wi-Fi, and so on, how much does it cost weekly or monthly? Are there other fees, such as a homeowners association?
What’s your budget for hiring a property manager, a cleaning company, or other professionals who can help with maintenance? Try and think of the many obligations you might incur in the running of your rental property.
The Paperwork
At every stage of owning a rental property, you want to ensure you are on the side of the law. It would help if you were thorough with the paperwork from your loan application to the signing of your first tenant lease.
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In the home buying stage, you want to ensure that the actual owner signs the deed to you and that there are no prior property disputes. If you’re buying a property that already has tenants, you’ll want to draw up a new lease for record purposes and avoid any hiccups down the line.
After closing the sale, you need to apply due diligence when filling your vacancies. It will help if you have a written recommendation for choosing tenants to avoid civil disputes. This document will come in handy should an applicant suspect that you’re unfair or unreasonable in your decision.
For successful candidates, you need an airtight tenancy lease that respects both parties’ rights. You should be familiar with national and local landlord-tenant laws so you don’t draft a void contract. Are the rules and regulations favorable to landlords in the jurisdiction you’re considering?
It’s not a bad idea to lean heavily on a more experienced real estate agent or lawyer who can help you navigate the rigorous paperwork and avoid common pitfalls.
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Conclusion
Purchasing a rental house is a big move, and there are many factors to consider before signing your name on any deed. However, the three most essential considerations should be the location, the cost, and the paperwork.
Being a landlord can be rewarding if you do it right. Do your research, make a list of questions to ask before renting, and hire a team of experts to complement your weaknesses and make your business more efficient and profitable.