The current housing market is still on quite the rollercoaster ride. Right now, it’s a seller’s market. Homes are selling for higher than their value due to high demand and low supply.
While experts expect this to change slightly over the next year, it’s only a prediction. If you’re currently looking to buy a house, it may be an opportunity for you to consider using it as an investment rental property.
This is when you purchase the house to rent it out, allowing you to pay off the mortgage and make some extra money while living somewhere else.
If this sounds interesting, take a look at these five tips when buying a rental home:
1. Cost of Repairs and Renovations
More than likely, your first home purchase may not have all the bells and whistles you’d like to have in the future. Things like updated appliances or upgraded countertops may end up being a renovation project.
However, certain repairs such as roof replacement will need to be completed before purchasing the house. If you’re getting a great deal on the house, make sure to receive quotes from contractors. These are more complicated repairs that need to be addressed by a professional.
2. Know The Laws
Rental properties have to adhere to strict codes and regulations that may differ from purchasing a house for yourself. For instance, you have to be able to provide a livable environment that is free from excess noise.
As a landlord, you’ll also need to abide by the Fair Housing Act. Each state and even city has a unique set of rules to follow.
Additional landlord responsibilities include handling maintenance requests on time, never showing up unannounced, and providing legal lease agreements that adhere to tenant laws. Consider working with a real estate attorney to draw up the necessary paperwork so you, your property, and your tenants are covered.
3. Location Is Key
You may have a dream neighborhood you’d like to live in. However, when looking for a rental property, you may want to consider looking into the location’s rental market.
This could include things such as what local restaurants are nearby as well as school districts, flood zones, and crime rates. The more amenities that are nearby or provided with the house, the higher the rent you can charge.
Remember, you’ll need to find the balance between the price you intend to charge along with what the comparative rental prices are in the neighborhood.
4. Finding The Right Tenants
Owning a house means you’re investing in something that builds equity over time. It’s incredibly smart to rent out a house you already own because the mortgage is covered by the renter – helping you continue to build equity over time without the financial burden.
However, you’ll want to make sure you find the best tenant for your property. Again, you need to follow all laws regarding the Fair Housing Act in your area. To ensure you find a suitable renter for your property, you’ll want to follow a few steps.
- Enhance your rental listing with high-quality photos and specific needs of the tenant such as handling landscaping, whether or not pets are allowed, and what behaviors you expect of your tenant.
- Perform a criminal background check on all applicants.
- Have potential tenants fill out an application for you to confirm employment, income, and rental history, along with a list of referral names and contact information.
5. Determine Your Financials
Most importantly, you need to have a grasp on your finances. There are things to consider such as paying a double mortgage throughout times of vacancy, regular repairs and maintenance, and additional annual taxes you’ll have to pay for renting your home.
It’s best to work with a professional accountant before making any big moves to determine if you can financially support this type of investment. You’ll indeed need to buy a second house or resort to renting while someone is renting your house.
When you rent out your home, you have the opportunity to build equity and even make additional passive income. However, you’ll need to put in the necessary research and work that coincides with such an investment of time, money, and energy.
Start connecting with people in your area who are currently doing this. Most often, they’re willing to share the knowledge they’ve learned from renting and investing. They can give you a lot of information about what has worked, helping you to avoid unnecessary burdens