If you’re considering buying a rental property or even if you looking to invest for your second or third time you’ll need to consider the following items before making that jump.
- Make sure you’re ready. If you already have one or two rental properties, you know how much they can cost, especially if there are unforeseen expenses with repairs or tenants that leave early. Extra income is great, but only if you’re able to manage that new property in both the best and worst case scenarios.
- Don’t make assumptions about mortgages. Mortgages meant for rental properties are handled differently than ones meant for a home in which the buyer will be living in. Check with your lender to make sure they are the right ones to work with when it comes to taking out a loan for your newest investment.
- Do your due diligence. All investments are not created equal. Make sure you have a firm understanding of exactly what you plan to do with the property. Are you wanting to buy a property that will be immediately ready for rental or are you willing to spend less initially and put a little work into it? There are many paths you can take with buying real estate, so make sure that you understand what you’re looking for before you buy.
- Always know the community you’re investing in. This is especially important if you are investing in an area in which you do not have any previous ties. You may have heard about a good deal in a different city or different neighborhood, but the deal may not be as good as it originally seemed once you dig a little into the community.
- Know what to look for. All the research in the world will not help you if you’re not sure what to look for in a new community. There are certain features that will help you to snag a rental that will bring in a higher rent rate than others might.
- Don’t lose out on great deals. You don’t want to become so bogged down in research that you don’t move quickly enough to snag a good deal. If you’re going to find that perfect investment for you, you’ll need to find balance between researching the area and making a bid for the home.
- Choose which type of property you wish to invest in. If you’ve only bought single-family homes up until this point, you may wish to stay on that course, or you may choose to branch out. There are pros and cons to both, so make sure that you do your homework and choose what works best for you.
- Consider investing in specialized housing. You may wish to find a niche in the rental community. There are many options if you would like to take this route.
- Think about investing locally. Investing locally comes with quite a few perks, including a better knowledge of the area, the laws that govern it, and the ability to manage your own property if you choose to.
- Should you purchase a new or used property? A used property will, of course, be a cheaper buy at the start, but may come with a set of unforeseen problems in the way of maintenance. As with every step of the investing process, a certain level of research is required to make sure you don’t lose money on what you thought was a good deal.
- Avoid liens and pre-purchase legal issues. You don’t want to buy a property and find out after everything is finished that there is a lien on it that you are then responsible for.
- Are you investing in real estate to save for retirement? People choose to be landlords for a variety of reasons, and one of those is to build up a nest egg for retirement.
- Research the tax issues and benefits. Many people assume that all of your expenses are tax deductible. Current tax laws have income restrictions on tax deductions for rentals. You should consult a tax professional to be sure.
If you would like to discuss any of these points, please give me a call or send me an email.