Property is almost always a great long-term investment. It can also be a practical short term investment as well. Just depends on when you buy, when you sell, and how much both transactions amount to…For the last year, prices on property has been dropping in many areas. That is bad news if you're looking to sell, but it puts the ball in your court if you're interested in buying. The market is changing, and everyone expects a rebound. Right now is a time to jump into the pool and make an investment if you have the cash available. Buying rental property in a down market can be a lucrative investment but there are some factors you should consider before you jump in.
We’ve quizzed our experts, and have these great four tips for you when looking for a rental property.
• Where do people want to live? Where do they want to shop? Where do they want to eat? Find out where tenants want to be…and buy there. Not only where do they want to be now, but look in areas that are going to be good in a few years. If you want a sure-fire bet, ask your real-estate agent to show you properties with solid rental track records.
• Don’t over extend yourself. Make sure your rental income will provide for your expenses. Don’t hedge too tight to the line. You don’t want to be worried on a month to month basis that you will have a shortfall. Plan for emergencies, for the occasional month you don’t have a tenant, for unexpected repairs, and definitely plan to have a small and tidy profit after you pay off your loans or mortgage.
• Find reliable and stable tenants. Screen the people who are renting your property. Don’t skimp out on background checks, credit checks, or references. Don’t take a leap of faith. These tenants are occupying YOUR investment. Make sure you have people who will provide for your income and not damage the property. Never rent to anyone without having them fill out an application that includes references - then be sure to check those references! Verify their employment record and, if they've leased or rented before, talk to former landlords to see if they've had problems in the past. A credit check is also a good idea - if they are already having financial problems, you don't want to be the next one on the list.
• Always have a standard rental contract drawn up that outlines the rules and regulations of the property, the rent and when it is due, any deposits required and rules regarding landlord access to the unit, etc. Be clear about what repairs and maintenance are and are not your responsibility as the landlord and the rules covering changes such as painting the rooms, etc.
• If you can’t manage the property, invest in an agency that can. Don’t have the time to manage the real estate? Then find an agency that can do it and can do it effectively.
• Make investments in your property that will reap further income. Landscaping, painting, new appliances, new carpet or floors – these will all add to the value of any real estate in the long-term, as well as make your property look more attractive to short term tenants.
• Know the laws and regulations in your state or local municipality. If you don’t know them – learn them. Or hire a agency to manage the property that does!
Those are some simple pointers, and there is a lot more fine points and common sense that we can provide you with when thinking about making the leap.
Kuester Property Management