In the US, about 36% of the nation’s 122.8 million households are renters. In a tight and competitive housing market, the need for rental units increases even more because it can become harder to actually buy a home.
Are you considering real estate investing? As a property owner, you can use the property to rent and grow your wealth over time, both through rent and equity in the property.
If you have some ideas that being a landlord for rental properties is easy money, you might want to think again. While it can be a lucrative way to get into property investment, it also requires some real knowledge and hard work.
Read on to learn what you need to know about becoming a property owner and landlord.
Know What You’re Getting Into With Property Investment
While being a real estate investor can be lucrative through the rent you get in return, you shouldn’t go into it assuming it’s easy.
You’ll need to go into the property management part of the investment with a realistic lens. It can be both challenging and hard work to manage real estate.
Think realistically if you want to be an investor, do you also want the role of landlord. As you consider investing in real estate, be prepared to hire professionals who can assist you along the way.
You will need a real estate attorney to handle the legal issues including security deposits, late rent, lease agreements, and repairs. You might also want to be more hands-off and hire out the day-to day management of your properties to a property management company.
As a Landlord, Know the Laws
When you’re a landlord renting to other people, you’re still bound by laws about how you handle your tenants. Before you actually have tenants, it’s important to know the laws and be prepared to follow them.
There are three sets of laws to consider, local, state, and federal laws.
Local laws will focus on ordinances in the area. They’re likely also to cover necessities like water and heat for the property. State laws are likely to cover:
- Evictions
- Housing standards
- Landlord’s right of entry
- Maintenance and repairs
- Security deposits
At the federal level, laws will cover a broad range of laws like discrimination, environmental health and safety issues.
Know the Market In Your Area
Before you jump right into property investments, it’s important to know what you’re getting into in the area. You want to take your time and consider the housing market in the area of your investment.
Is there an abundance of rentals sitting empty? Is the market pretty flooded with rental options already? This probably is not the area you want to buy into. The flip side of this is that if there are limited options for rentals. it will make your property more desirable.
Research What It Will Cost to Become a Property Investor
It’s likely you’re looking to become a property investor to make and grow your money. In that spirit, you want to know what it will cost you to become an investor. Sure, you’ll make a profit from rent money. But what costs should you be prepared to incur as you buy a property?
These costs can’t outweigh the potential profits to make the investment worthwhile. Costs are likely to include:
- Monthly mortgage payments
- Maintenance and repairs
- Insurance
- Property management
- Utilities like water and electricity
You want to factor in ancillary costs like attorney fees, advertising your property, even insurance costs as you consider whether the investment is worthwhile.
Financing and Buying
If you’re sure you are ready for the responsibility of being a landlord, now you’re ready to make a real estate purchase. You’ll need to consider how to finance your investments. How much down payment will you use and what form of financing?
Your options include:
- Conventional Mortgage
- Second mortgage on an existing mortgage
- Commercial property loan
- FHA loan
- VA loan
As you consider your financing options, this becomes a part of the cost considerations. You’ll want to remember to consider closing costs and insurance too.
Market Research on Rentals Prices
Once you have the property, you’ll want to have some knowledge about what to charge for rent. Sure, you might want to make some money and the urge might be there to charge lots in rent.
If you want renters, you need to price competitively in the market. It’s important to go beyond what you personally think the rental property is worth.
Do the market research and find out what comparable properties in the area are renting for. The big mistake you can make is to price your property wrong and it sits empty with no renters in it.
Getting Tenants for Your Investment Property
Once you’ve made the purchase and done the leg work, you’re ready to look for tenants for your property. This is where expertise and experience matter. You only want to rent to tenants who are qualified to be renters for your property.
You want to do the work to make sure you get the best possible tenants for your property. Make sure you screen them by getting:
- Applicant’s credit history and credit score
- Background check on the applicant’s criminal and public records
- Contact previous landlords and references
- Conduct an interview with potential renters
- Collect financial information
It pays to put in the extra effort to check all these things, then you can be more sure you’re getting the best possible renter.
Make Your Dream of Being a Property Owner Come True
There are many financial advantages to becoming a property owner if you approach it the right way and do your homework so you make sound investments and get the best tenants for your property.
Maybe made the investment into a rental property and now help manage the property. Contact us today to learn more about our property management services.