With so many distressed listings and foreclosed homes on the market right now, the thought of purchasing real estate property seems to be gaining interest.
(prHWY.com) November 25, 2012 - USA, AL -- USA, Nov 25, 2012 - With so many distressed listings and foreclosed homes on the market right now, the thought of purchasing real estate property seems to be gaining interest. If you're wondering whether you're cut out to be a landlord, I'll tell you in this article.
Benefits of Owning Rental Property
Owning real-estate certainly has its benefits and drawbacks. Let's begin with the favorable stuff: It could be very profitable. Real estate is a tangible asset that you control and everybody needs a place to live. You may make money using real estate in two basic ways cash flow and appreciation:
Cash flow or income results once the rent you collect from the tenant exceeds your total expenses. Expenses for any rental property may include the home loan payments, property taxes, insurance, maintenance, and repairs.
Appreciation is the increase in value that the property may go through over time.
How to Make Money on a Rental Property
You might buy a property within a good neighborhood that requires repair. If you're handy and look foward to fix-up work (or have sufficient profit in a deal to hire a contractor), you may make the repairs then sell it for a profit, or maintain it for a rental. Some people prefer to invest in multi-family properties which are already making money or one where they are able to live onsite in one of the units. Or you could buy a vacation home that you simply rent on a weekly or monthly basis and use for yourself part of the year.
Once you pay off the mortgage on a rental property, it's really a nice source of extra income while you're still working or during your retirement. So, how you structure a real estate investment depends upon your resources, just how long you intend to own an investment, and the options that come with the property that you buy.
Disadvantages of Owning Rental Property
Considering that the advantages sound so great, I need to give you a dose of reality to balance them out up against the disadvantages. Managing investment property and becoming a landlord is a tough business. I can tell from experience that it's easy to underestimate the costs of repairs when you're repairing a fixer-upper. It's also difficult to deal with tenants who call late into the evening with a clogged sewer system or who don't pay their rent. I've had tenants disappear in the middle of the night and leave furniture and closets filled with stuff for me to take care of. They could damage your property or have problems that they never report back to you. Unexpected vacancies can drain all the profitability out of a good investment, too. No, being a landlord is certainly not for the faint of heart.
8 Tips for Buying Rental Property
Therefore, buying a rental property or a fixer-upper is a business decision therefore you must crunch the numbers for it cautiously. I'll give you some resources to help you do that at the end of the post. The bottom line is that you have to be completely confident that you can make money no matter if you have higher-than-expected vacancies or lower-than-expected rents and appreciation.
Here are 8 tips for buying rental property:
1. Be sure your personal finances are in order. Never buy a rental property if you don't have a healthy emergency fund. Remember that you'll be responsible for mortgage payments and repairs even if there is no tenant.
2. Get preapproved for an investment loan. Sit down with a mortgage lender or broker to find out if you can afford to make an investment before you spend a lot of time searching for a property.
3. Research going rents. Ask real estate agents, property managers, or other renters in the area how much you can realistically expect to charge for rent.
4. Buy properties in good locations. The quality of the neighborhood is important for keeping good tenants. Take a look at the proximity to employers, schools, parks, and public transportation. If you plan to manage a rental yourself, be sure that it's fairly close to your home.
5. Make purchase offers contingent upon inspections. Always pay to have professional inspections made so you can determine what repairs may be needed and if there's evidence of pest damage.
6. Get ample insurance. You need to have plenty of liability insurance to protect yourself in case someone is hurt while they're living in or visiting your rental property.
7. Know the rules. There are federal and state laws regarding rental property that you must not to violate. Visit nolo.com for information about the landlord-tenant laws.
8. Consider the services of a property manager. After years of managing my own rental properties, I turned them over to a professional. Even though a property manager charges around ten to fifteen percent of the gross rent they collect-to me, it's well worth it. If you want to circumvent all the hassles of managing a property, be sure to add the expense of a professional manager into your calculations before you decide to buy a property.
About the Author:
We Buy Houses - Kios LLC provides affordable homes for Central Florida residents. The company was formed in 2009. Kios LLC owners have a combined experience of 25 plus year in Real Estate Investing and 7 years in Mortgages. We find and qualify buyers that have been negatively impacted by our current economy, and then find a property that meets their needs. As skilled bank negotiators, we at Kios LLC can find short sales for new buyers and negotiate loan modifications.
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