No matter how you became a landlord -- a home you couldn’t sell or a property left to you by a relative -- chances are, if you see any success at it, you may decide to buy more homes to rent out. Working with a real estate professional is crucial to reducing stress during the buying process. As a landlord, though, buying the property is the easiest part. Your headaches and hassles show up once you put it on the market and later when you have tenants in the property.
Knowing what things to focus on when you’re selecting your investment property will help reduce the stress once you close and are ready to rent it out.
If this is your first investment property, you need to understand one thing. The taxes will automatically be higher than what you’re used to paying. There is no homestead exemption on a property you don’t live in. You’re going to be taxed at the full amount allowed by the state, county, and municipality. It’s worth checking millage rates around the area. The difference in millage rates may help you decide between properties.
If your goal is a long-term renter who can afford the rent you’re asking, check the neighborhood. The property might be a bargain to buy, but if it’s not located in a place where families want to live or the market can’t bear the rent you want to ask, it’s not a good deal. You’ll pay a little more for a property in a nicer neighborhood but you can also ask for higher rent in that neighborhood, too.
Families who rent want many of the same things as families who buy want - nice neighborhoods, safe areas, and good schools. If you’re faced with the option of multiple property choices, with everything else being equal, go for the property located near the best school. It will help you market your rental and attract the kind of tenants you want - stable, long-term, and able to pay.
As a landlord, you’re responsible for providing a safe home for your tenants. Stay away from properties located in crime-ridden areas of town. If not, you’ll have to put more time and money into the property to make (and keep) it safe. You’ll also have a hard time asking the rent you want and getting good tenants.
Type of Property
Before you buy your investment property, consider your personal and professional goals. Do you want a property that brings in long-term tenants? A single family home in a nice neighborhood is probably the way to go. Would you rather take advantage of seasonal renters or tenants looking for smaller spaces? A condo might be your best option.
Fixer Upper vs. Move-In Ready
Anyone who’s ever bought a home that needed work will tell you that there are always surprises, no matter how good your home inspection was. Fixer uppers can be bought for a steal, but the expenses of a renovation can add up quickly. Weigh your options and steer clear of the property that needs a lot of work unless you have plenty of home remodeling experience yourself or you know an excellent contractor who will give you a fair price.
When you’re ready to turn your small rental income into something that can help you retire early, see the world, or simply pay your bills, it’s time to invest in property. Before you jump into the market, looking for a good deal, do your homework.
Work with a real estate professional that understands investment property and can connect you with property management professionals to help you turn your investment into long-term income.