Buying rental properties has become more prevalent in recent years, and for a good reason. More and more people are seeing the benefits of owning rental properties. However, purchasing one does need to be thought about carefully. In this article, we will go over some of the best tips for buying your first rental property and how you can succeed in the long run.
Discover The Best Location
Everyone has heard about the importance of location when it comes to real estate. This is especially true when you are looking at rental properties. The location of your rental property should be close to public transportation, shopping, and other amenities. It should also be in a safe neighborhood. By choosing a good location, you can ask for higher rent prices because people will be willing to pay more to live in a desirable area.
You should also think about the type of tenants you may be renting to. For instance, if you are exploring properties in a seasonal or tourist destination, then you will want to make sure that the rental property is close to the beach or other attractions. On the other hand, if you are looking at rental properties near college campuses, your tenants mostly include college students or young professionals. It is essential to be aware of your target market when choosing the location of your rental property.
Understanding The Duties Of A Landlord
Is this your first time purchasing a rental property? It’s essential to understand the duties of a landlord. These tasks include maintaining the property, collecting rent, and dealing with any repairs or emergencies that may come up. Some typical maintenance tasks for rental properties include:
- Landscaping- would include cutting grass, trimming trees, etc.
- General upkeep- aspects such as painting, fixing holes in walls, and pressure washing exterior areas
- Appliance repair- If any of the appliances in the unit break, it is the landlord’s responsibility to repair or replace them.
Many landlords hire property managers to assume these tasks because they don’t have the time or live too far away from the rental property. It also takes the stress of trying to do everything themselves. However, it is always recommended that the landlord use a state-specific and lawyer-written lease agreement made just for the property. If you owned a rental property in Ohio, for example, then it would be best to use an Ohio residential lease agreement.
It may also be in your best interest to consider landlord insurance. Protecting your bottom line is crucial, and this type of insurance can help if something goes wrong on the property.
Screening Potential Tenants
Owning a rental property is a potentially lucrative opportunity, but choosing the right group of people to live there can make all the difference. Screening your tenants is really about risk tolerance because there will always be some degree of risk when renting out your property. Hopefully, you’ll find tenants that take care of your property, pay their rent on time, and cause minimal problems.
Here are some factors that you should screen for when considering potential tenants:
- Credit score- A good credit score reflects responsible borrowing and repayment habits.
- Employment history- Consider tenants who have had a stable career with no long gaps between jobs (other than for reasons like having children or going back to school).
- Background check- This will help uncover any previous evictions or criminal convictions.
With modern technology, screening potential tenants have become more sophisticated to help protect landlords. For example, services like a tenant background check can help you to verify a tenant’s identity, run a credit check, and get previous landlord references all with the click of a button. Establishing a strong tenant-landlord relationship is a significant contributor if you plan to have successful rental properties.
Reduce Your Personal Debt
There can always be unexpected expenses for anyone who owns a rental property. While it’s okay to have some debt, it’s important to try to reduce your personal expenses as much as possible before you purchase a rental property. This will give you more financial flexibility in case you need to make repairs or deal with other unexpected costs.
Focus on paying off higher interest debt like credit cards and personal loans. This will reduce the amount of money you need to pay each month, freeing up more cash flow to put towards your rental property.
Take Action After Your Accepted Offer
After you’ve found the perfect property and your offer has been accepted, it’s time to take action. These tasks would include making enhancements to the property if you desire, hiring a property manager, and looking for potential tenants for the property. It is important to get started, but ensure not to bite off more than you can chew. Start with one rental property and then add more as you gain experience.
Takeaways
- If you own a rental property, it’s a great way to earn extra income, but there are a few things you should keep in mind before taking the plunge.
- The location of a rental property is important because it will affect the type of tenants you attract and how much rent you can charge.
- It’s important to have realistic expectations regarding the amount of income you can generate from a rental property. Be prepared to spend money on repairs and maintenance and be patient with the process.
- Screen potential tenants carefully to find ones that will take care of your property and pay their rent on time.
