Are you looking for a turn key property that you can rent out right away or are you looking to get a steal of a deal on a fixer up and fix it up yourself? Fixing up a property is not easy and can be very time consuming. If you go the fixing route, make sure you are prepared for the investment of hours and add a “miscellaneous” line to your budget for when you find yourself in a jam and need to hire a professional.
Take a look at your monthly mortgage payment vs. what similar properties in the neighborhood are renting for -- what’s your margin? Remember that as a landlord you’re paying when the plumbing breaks or when the AC goes out. Is there enough margin to cover potential repairs? Be sure to take into consideration the cost of getting the property ready to rent and aim high so that you aren’t surprised in the end.
Location, Location, Location.
While it may be a real estate cliche, take location into consideration. Is the property that you’re interested in an easy commute for you? Is it in a good location for renters (think young and active)? Before buying, talk to your real estate agent about the best rental neighborhoods in your area.
Decide how to manage the property.
Before you dive in consider how you want to manage your investment. Are you wanting to be a hands-on landlord and do it yourself or are you wanting to sit back and relax as the income streams in? Research local property managers and find out how much their services would cost. Add this cost to your numbers to determine if it’s worth it.
Make it official.
Form a limited liability company (LLC) before purchasing your property. This will prevent your personal assets from being at risk should something happen. Research everything you will need as an investor, including insurance policies. If you aren’t living in the property look in to getting a “dwelling” policy as well as liability insurance. Keep the finances for your investment property separate from your personal finances. It may also be helpful to sit down with an accountant to learnwhat taxes to expect at the end of the year.
Find the perfect place!
Still on board? Get together with your real estate agent to head out and see what you can find! Your real estate agent can help you find the perfect place and negotiate a great price.