Here’s What You Should Know
Guest Written by Katie Conroy of AdviceMine.com
From the extra money you’ll receive in rental income each month to the many tax benefits you could qualify for, there are plenty of reasons to invest in a vacation home, condo, single-family house, or any other type of income property. In addition to these benefits, however, there are several things you need to know before making your purchase. For instance, you’ll need to select a high-demand location, pay for a home inspection, and decide whether you’re going to hire a property management company to assist you in maintaining the property and collecting rent from tenants. To learn more about the different things you need to know before investing in real estate, read on!
High-Demand Areas Generate the Most Income
Whether you’re planning to invest in a single-family home or condo, or you think a vacation home, cottage, or cabin could be a better investment for you, it’s important to carefully consider the location of your rental property, as this will allow you to charge more in rent while also lowering your risk of vacancies. According to financial experts at Millionacres, you can change most things about your new investment property—whether it be the paint colors, number of bathrooms, and kitchen appliances—but you can’t change its location. As you select a location for your investment property, it’s best to look for areas with the following:
● Good-quality schools, especially if you’re investing in a single-family home
● Positive job growth and low rates of unemployment
● Access to local amenities, whether it be grocery stores, public transportation, or shopping centers
● Safe neighborhoods with lower rates of crime
● Access to services like high-speed internet and cable.
If you’re planning to manage your own investment property instead of hiring a management company to assist you, it’s also important to search for a rental home that’s within a reasonable driving distance to you. If you live more than an hour from your investment property, you may struggle to make timely repairs or resolve other tenant-related issues.
Property Inspections Are Vital
In addition to choosing the right location for your big investment, you’ll need to pay for a professional inspection (home inspectors charge $300 - $450 on average) before closing on the purchase of the property, as this will help you to identify any costly damages, structural issues, or repairs that will need to be made before your tenants can move in. During the inspection, for instance, the property’s HVAC system, foundation, roof, and other big-ticket items will be evaluated for safety and functionality purposes. You’ll also need to take a close look at the windows to see if you need to hire someone to handle any possible repairs. If you aren’t comfortable with the results, you’ll have the option to back out of the sale before it’s too late.
Additionally, you may be able to use the results from your inspection to make negotiations with the sellers—especially if you’ll need to replace the home’s central air conditioning unit, furnace, or make other expensive repairs. Installations can be quite expensive, due in part to:
● The size of the air conditioning unit
● How difficult the installation process will be
● The types of materials needed to complete the installation
● The labor needed during the removal and disposal of the existing air conditioning system
A Property Manager Could Be Well Worth the Cost
If you hire a property management company to assist you in screening and collecting rent from tenants, handling paperwork, and maintaining your new rental home, you’ll typically need to set aside anywhere from 4 to 12 percent of your monthly rental rate to cover most property management expenses. However, the cost of hiring a property manager could be well worth it, especially if you’re not sure you have what it takes to be a landlord. As a landlord, you’ll need to make repairs whenever something breaks or stops working, or you’ll need to hire a contractor to assist you.
Another important aspect to consider is the process of making improvements your property in order to enhance its desirability. Agostina Chemello from Porch.com wrote a very helpful article with some great tips: How to Turn Your House into a Rental Property Paradise.
Purchasing a rental property is a huge investment that requires a great deal of planning and budgeting, and it’s important to consider all your options and learn everything you can before investing in your first income property. The more you know about rental property investing, the better off you’ll be as you begin to manage and maintain your first investment property.
When you’re ready to purchase a property to use as a rental, get in contact with Tim Allen Properties. Visit the website or call 831-214-1990.