Thinking about getting into the landlord business? Making the jump can be scary, but with a lot of hard work and a little luck, you can have a successful investment property of your own.
The search begins
While you may want a real estate agent to help you finalize the purchase, we recommend that you start looking at potential properties on your own. It is essential that you take an unbiased approach to each property and neighborhood that falls within your budget.
Let’s to a look at the top 10 items you should keep in mind while you’re searching for your ideal rental property.
- Property Taxes
- Job Market
- Building Permits & Upcoming Projects
- Quantity of Listings/Vacancies
- Natural Disasters
Speak with renters and homeowners in the neighborhoods you’re considering to learn more about the area. Renters will be much more forthcoming about the negative aspects of the area because they have no permanent ties. If you’ve decided on a neighborhood, visit it at varying times to see your future neighbors in action.
The rental home
Once you’ve narrowed down your neighborhood, try to find a property that has the potential to increase in value and a positive projected cash flow. Look at homes that are above your budget as well as those within your reach. For appreciation potential, look for a property that will attract renters who are amenable to paying higher rents. This will also help to raise the value of the home if you choose to sell it later on.
As far as income goes, you are going to have to make an educated guess. Take the typical rent for the area and subtract your anticipated monthly mortgage payment, plus property taxes, insurance costs and a generous expenditure for maintenance and repairs. Don’t underestimate the cost of maintenance and repairs or you will pay for it once the property is yours. If the numbers come out even or, even better, with a little extra, you’ve likely got a successful investment property at your fingertips.
The bottom line
Every state has good cities, every city has great neighborhoods, and every neighborhood has some excellent properties, but it takes a lot of time and dedication to find all three. When you do find the right rental property, keep your expectations realistic and be sure that your own finances are in a good enough state that you can wait for the property to start bringing in income, rather than needing it right away. Real estate investing doesn’t start with purchasing a property – it begins with creating the financial situation that makes buying one possible.