You might be a first time purchaser or an experienced property owner. Either way, these four tips are a great reminder of things to consider before investing in a property rental.
1. Maintenance
It’s nice to estimate upkeep charges, but actually performing the maintenance can end up being a lot more hassle than just fixing a leaky toilet every now and then. Factor in parts, labor, and even the time commitment to drive to your property. Consider all appliances such as water heaters, furnaces, washer/dryer along with their useful life (how many years in service they will last). You will need to perform regular property inspections as well as communicate with the resident about any issues. You can manage the property on your own, contract out the work, or even hire a property management company to take care of everything. Whatever you choose, remember you need to maintain the rental to all health and safety regulations. If you fail to maintain the property, you might be on the wrong end of a negligence claim.
2. Location
Everyone has heard the old adage location, location, location, but not everyone takes it to heart. It is absolutely necessary to consider where the rental property is. Think about your target tenant. Is the property placed on a busy street? You might have a hard time getting families with young children. Are you looking for older renters but are too close to a college campus? Always ask for the current rent-roll if any. These charts of rent including the names of tenants, rent amounts due, and also the tenant’s indicated total income can validify the investment.
Another thing to consider is landlord insurance. Certain locations may charge more for an insurance policy.
3. Insurance
Landlord insurance is a necessary purchase if you will be renting out. Most homeowners insurance policies do not cover events due to paying tenants. This could be an extremely expensive mistake and the problem may arise with no warning. Do yourself a favor and invest in proper protection.
4. Tenants
The longer your property sits empty, the more money you will lose. Will you be inheriting tenants or need to find completely new renters? Promote the rental to make sure there are no vacancies. Perform a criminal and credit background check on all prospective tenants. Collect a deposit equal to one month’s rent. List your property on Apartments.com, Craigslist, and Facebook. You will need to draft a proper lease which is a legally binding contract between you and the tenant.
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