So, you are ready to buy your first income-producing investment property… Congratulations! But before you buy that property, there are several things to consider before signing any deal. Understanding how to become a successful landlord are tantamount to success. With some research and planning, new and seasoned landlords alike can find their sweet spot in today’s market and reap the rewards of savvy real estate investing.
The Basics
You have made the decision to invest in a property to rent and maybe even have your eye on another property so what’s next? First and foremost, you must understand what the demand is for rental properties in your area. If demand is low, finding a tenant or setting a price that optimizes your investment may be challenging. As the market changes rapidly, staying on top of trends is imperative. In addition to understanding market demand, there are legal considerations. From tax codes to inspections, federal, state and local laws are there to protect the tenant AND the landlord. Familiarizing yourself with the Minimum Housing Standards and using professional consultants will ensure everything is done by the book.
Costs and Property Management
Investment properties are a great way to build wealth and make money, but these homes also come with costs. Insurance, taxes, association fees, maintenance and yes, even an occasional bad tenant are sources of additional costs that should be factored into your expected return on investment. While background checks, credit checks and references will help you to choose the best tenant, using a professional property management company will go a long way in protecting your investment. A good property management company will know everything necessary to successfully manage your property while keeping you apprised of anything and everything that you need to know about what is happening in your rental unit. Should you find success as a landlord and buy additional properties to rent, hiring a professional property management company is a must.
Preparing a Property to Rent
Just as home sellers should walk through their home to see it through the eyes of a potential buyer, so too should landlords look at their rental property from the renter’s point of view. If you were considering renting the home, what would you look for? Basic repairs, a thorough cleaning and ensuring everything is in good working order are the baseline essentials. Desirable features such as a washer and dryer, high-end appliances or modern fixtures and finishes will increase the appeal of your property, giving it an edge in the market.
