Are you thinking about investing in a rental property? If not, maybe you should be. Here’s why.
In 2016, 65% of people 35 years old and under were renters rather than homebuyers. That’s up from the 57% that were renters in 2006. The demand is growing for rental properties, which makes purchasing them a great investment. However, there are several things you need to know before you decide to become a landlord.
You need to do your research before investing in a rental property because a lot goes into being a landlord. You should be prepared to advertise for renters, complete legal agreements, maintain your property, collect money from renters, and handle utilities. You may even need to hire someone, like a property management company, and a real estate attorney to help you with potential legal issues.
You will need to evaluate many things before you are a landlord. One of the most important things to evaluate will be the area you want to invest in. You should look at average neighborhood rent to calculate rent prices. There are several tools that can help you do this, several of which are online. This is the easiest way to find average rents.
You will also need to evaluate potential renters. You will need to do background and credit checks. You should check references and interview people before allowing them to rent from you. Keep in mind that you may need to evict someone if you haven’t properly evaluated them.
If you have done your research and evaluations, you are ready to purchase property. You will probably find your next investment opportunity by looking at rental property listings, scouring neighborhoods, or even using an app. Rental property apps can help you get property reports, do batch analysis, and even predict rent.
Before buying, take into consideration the area, the mortgage, taxes, and the proximity to your own home since you may be doing repairs or checking on renters. All of these factors will determine how much you make as a landlord.
Unfortunately, renters tend to move more frequently than homeowners—33% of them move each year. So, you will need to manage your property well in order to make the most money and to keep good renters. Make sure you’re following the law, writing leases, maintaining the property, staying organized, and choosing good tenants.
This may sound simple, but it can be easy for new landlords to become overwhelmed and cut corners. You should learn the landlord-tenant laws before you ever rent to anyone so that you are not discriminating against anyone. You should customize a lease so that it matches the situation, such as allowing the renter to have no more than one dog. Talk to the renter’s past landlord or employer first. Document the move-in condition of the property beforehand, and schedule regular inspections and maintenance. Make sure you are doing proper accounting and bookkeeping or hire someone to do them for you. Download a landlord app to help you stay organized.
Follow these steps and you should be making money as a landlord in no time. Just remember to plan carefully and hire help if you need it.