Are you interested in getting into real estate? Or perhaps you’re eyeing a property you want to open for rent. If so, here’s the perfect guide for you!
Real estate always starts with your property. You need to own one if you want to be the landlord rather than a manager. But the real question is, where should you start?
We’ll run you through the basics, from how to buy a rental property and make the most of your investment. Let’s begin.
How to Buy a House for Rental Purposes
Buying a property to live in and rent out requires you to make different decisions. The following is a quick guide on how to get you started:
Decide Your Payment Method
If you’re buying a property to start renting, decide on how you want to make your payment. Some people don’t mind buying a property in cash to avoid any extra fees from a loan, but others prefer a mortgage to maximize their earnings. Either way, it’s best to explore different financing options to see what works best for you.
One way or another, you might have to save for a down payment. A general rule of thumb is about 15% to 25%.
Apply for a Mortgage
Many recommend applying for a mortgage when you want to buy a property. It usually varies between a fixed-rate or adjustable-rate mortgage.
When you get a mortgage, start with a pre-approval to know which terms you qualify for and to see your interest rate. Pre-approval will also let your bank or lender know you’re serious about borrowing and paying it off.
Select Your Location
Rental property prices vary based on location. You would want a neighborhood that’s safe and convenient, but also less competition.
Look into the statistics of your chosen location before buying a property. Does it have access to commercial spaces? Are there many modes of transportation available?
This adds up to how much you can price your property and encourages people to rent it.
Remember that the more popular the location, the more likely it is for people to rent. At the same time, properties and rent prices may be more expensive.
Check the Market
Once you have a location, check the status of the market. That includes the demand for rental properties, the usual renting cost, and the like.
You need to choose a neighborhood or market that will offset the price you pay for the property. Doing so ensures you receive income, rather than lose money or stay stuck in a cycle with no profit.
Choose Your Unit
Not all properties for sale are brand new or in the best condition. Some need a lot of work and even go as far as starting over.
If you want to rent out the property, calculate the possible expenses first. It allows you to see if your prices are enough to cover them while still being reasonable.
Some properties are also ready-to-rent. So, all you have to do is check it out and decide if it works for you. Deciding on this allows you to save time in the “buy real estate near me” searches.
Look Into Taxes
Besides the cost you spend on the property, you should check its taxes. These vary from state to state, so look into it if you’re buying a property away from where you live.
Homes built next to schools, shopping malls, or other public amenities are likely to have higher taxes. If you choose a property like that, you might have to increase your rent to ensure it lines up with those expenses. Otherwise, look for a location that’s a bit further or in a remote area.
Basics of Rental Property Management
Many people say real estate is an excellent investment if you want something long-term. But the key to really making the most of it is good management.
Here are a few tips to help you handle your property:
If you want to succeed with your property, you have to ensure your customers get satisfied. One way is by making sure you keep everything maintained. That means getting repairs done sooner or providing systems to make it easier to coordinate with a renter’s concern.
Although your house rules can include availability hours, you should make yourself in case of emergencies. Any damage or problem with the property is not only a problem for the renter, but also for you. So, you would want to address those as soon as possible to avoid a major impact.
If you want people to look into your property, make the pricing reasonable. You can determine whether prices are fair by checking the market. Try out rental property calculators if you want to see if your property makes enough to offset
Create Lease Agreements
Even if you trust your renter, it’s vital to create a rental lease agreement. It should include clauses that protect both you and your renter and bind you by law. So, it’s a way to assure that you and the renter will follow the given clauses.
Note that a commercial rental property is likely to have a longer lease. Before you settle with a tenant, make sure they agree with all the clauses to avoid conflict later.
Invest in Rental Property Insurance
In some cases, a lease won’t be enough to protect you from a renter who refuses to pay. If so, consider getting rent or landlord guarantee insurance. It protects you, the landlord, by covering the rent your tenant refuses to pay up to a specific time.
Learn How to Buy a Rental Property Here
There’s a lot to learn when you get into real estate, from taxes to general laws. But your property is always the foundation.
If you want to be a landlord, you should know how to buy a rental property and the steps to take to keep it alive. That way, you can make the most out of your investment!
Check out our blog if you want to learn about other similar topics!