Whether your watching home remodeling, home hunting or other home and garden shows, it’s inevitable that at some point, a rental investment is discussed. The story goes: A homeowner purchased a duplex and needs to remodel it in order to rent it and generate cash flow. That cash flow can go towards the existing mortgage or offer more financial freedom to the home owner. The idea sounds amazing! So, is it your turn to buy a rental property?
For many years, countless investors have purchased rental properties and generated steady financial income. Of course, real estate investors tend to vary on there parameters, investment budget and strategy. If you’ve been thinking of purchasing a rental property, your first step is to determine how much property you are able to buy, the same as when purchasing a home for yourself. Keep in mind that when purchasing a rental property, if you plan on assuming a loan, interest rates and down payment requirements are different than when buying a primary residence. So be sure to speak to a lender first.
Once your prequalified and establish a price point, the search for a prospective property can begin. What should you keep in mind as you embark on your search? Ensure you know how much your prospective property will rent for. Some investors entered the rental market with unrealistic rental expectations, thinking that they can rent the house they bought for much more than the market could substantiate. Keep in mind: Even in an appreciating, in demand rental market, you can over price your rental. As a result, this led to disappointment right from the beginning. If possible, partner with a quality property manager who can provide you with realistic numbers prior to your purchase.
Second, don’t forget that the age and condition of the property you buy may require some initial investment to bring it up to rentable condition and in turn, generate competitive market rent. Having a reserve for these costs and other incidentals is key.
Purchasing a rental property can be overwhelming, there is no doubt about that. Choose professionals who can guide you and help you. Before you know it, exploring the rental market and even entering it as a landlord may not be so overwhelming.
Curious as to what property management is all about? Visit www.nicklinpm.com and explore what Nicklin Property Management does for its clients.