One of the ways to invest in the real estate market is by buying property to rent. However, finding the way around it is not as easy as it sounds. I need to take all steps and considerations clear before finally putting down the money.
First Things First
Buying a property to rent out seems like an easy way to get extra income, but a lot goes into it. First, I have to ensure I am cut out for the task. Can I unblock a pipe or toilet? What about repainting or sealing cracks? You are probably thinking, “I can easily hire a property manager to take care of that.”
Although hiring is an option, it is not always a good idea to do so. Hiring someone for maintenance eats into my profit, so I should ensure I can save a bit from doing some of the work myself. Obviously, there are some maintenance tasks that should always be left to the experts. For instance, it is important to hire a qualified electrician for any electrical work that needs carrying out.
Further to that, any roof repairs should be left to experienced roofers due to the dangerous nature of the job, and the same goes for maintenance tasks like cleaning out the gutters. There is a reason that people hire companies like Clean Pro Gutter Cleaning Toledo to do this, as it can be very dangerous working at such heights.
Nevertheless, most maintenance tasks can be done yourself and you will keep your profits up if you decide to do so. If you choose to hire someone, that may be a wrong move. If you’re unable to do any of these maintenance tasks, then maybe you’re not cut out for buying a property to rent.
Another wrong move in buying a property to rent is when I have outstanding loans. Investment gurus do this all the time, but first-time investors should avoid it unless the investments’ returns are higher than the outstanding loans.
Ensure you Have the Down Payment
After being clear that this is an investment I can handle, I should ensure I have the down payment. Mortgage down payments only need 3% of the costs, while property for investments needs at least 20%. Investment properties require a higher down payment since mortgage insurance does not apply. I could use personal savings for this or look for banking financing.
Scout for the Best Location
Next, I will want to ensure I am scouting houses in the right location. Going for estates where people are moving out instead of in is like betting on dry land. On the contrary, it might be better to focus on cities similar to the ones mentioned on https://cristalcellar.com/san-gabriel-valley-real-estate-market-report, where the real estate market tends to be booming and more people are starting to come in, which means I will be working with high demand. Not knowing the local area can be an issue, so you might want to use a buyer’s agent to help.
Other considerations when house-hunting include amenities specifications such as schools, restaurants, shops, parks, and theatres. Property taxes vary across the country, so I will also want to ensure I keep it as low as possible – a buyers agent can help to navigate all of this. If you’re wondering what a buyers agent does, they can help you to determine your needs, schedule showings, and help you secure a property at the right price, amongst other things.
Be Sure About Operating Costs
Operating expenses are relatively high, and I wouldn’t want them overshadowing expected profits. New properties often require 35 to 80 percent in gross operating income. An ideal bet should be at least 50%. For example, if I charge $1600 on rent, then the operating costs will be about $800. Keeping this calculation in mind will give us a clear expectation when surveying different properties.
Start with a Low-Cost Home
I am one of those people who tend to jump into opportunities with all I’ve got, and this is not always a good idea, especially in real estate. The best property to begin with is a low-cost home. This keeps the operating costs low. According to the experts, one should look for a home worth $150,000 in a developing estate and be wary of the nicest house on the block. It could be the nicest to the eye but dangerous to the pocket.
Get Familiar with Landlords Legal Obligations
Landlords deal with human lives, which is why the government has policies to ensure no rights are violated. Landlord-tenant laws are quite precise with all legal requirements, so I need to get familiar with them to make renting out property work. They cover the relationship in terms of lease requirements, fair housing, eviction policies, and security deposits. Federal hassles can ruin one’s reputation as a landlord; therefore, it is better to be on the right side of the law.
You might also want to explore the option of hiring a property management agent near your locality. Hiring such services could have multiple benefits including agent taking care of marketing, operation, control, maintenance, oversight of real estate and physical property, etc. Additionally, these types of firms might also provide legal advises to landlords and tenants.
Landlord insurance is another vital requirement as it will cover my new investment. It offers covers such as liability protection and lost rental income.
Every investment has its risks. Therefore, I shouldn’t expect buying property to rent to be any other way. However, I can weigh my risks against my gains to ensure I make the right decision. Having an experienced partner on board can be a great way to start with the first property.
