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The Ultimate Guide to Owning a Rental Property

As a potential real estate investor, you may be aware of many advantages associated with owning and managing an income-producing property. For example, a rental property can produce regular income while potentially generating a taxable loss. You may be able to deduct operating expenses and depreciation. In addition, you can leverage your purchase with a loan, but you can enjoy appreciation on the full value of the asset rather than on the amount of your out-of-pocket investment. Your tenants will provide the income needed to pay down the loan balance through their monthly rental payments. As you prepare to make your purchase and become a landlord, you may be looking for exceptional tips and advice to guide you.

Do Your Research

From real estate agents to investors and others, many people may be eager to offer advice and make recommendations. While you can listen to the advice that you receive, avoid heeding it without conducting ample research. Your investment property is likely one of your more significant assets, and you cannot leave anything to chance. Before you make a purchase, research market conditions, market rental rates, crime rates and more. When you have more information that you need about the city, the rental market and other factors, you can make more educated investment and property management decisions.

Understand Local Laws

In many locations, local laws protect landlords in different ways, and they protect renters in other ways. From finding new tenants and signing leases with terms that can be enforced to evicting tenants and more, there are many facets of owning and running a rental property that can be affected by local laws. A real estate agent or property manager may provide you with information about some of the more common rules, but you may also need to seek legal advice from a local real estate attorney. This is particularly true if you have specific questions or concerns about a unique situation.

Set Up Affordable Financing

One of the most important factors that will impact your return on investment is the financing that you use to buy the income-producing rental property. Your loan payment will affect your monthly cash flow, and this can impact your financial ability to make property repairs and upgrades. It can also affect your ability to hire a property manager, if desired. More than that, financing plays a role in how quickly equity accrues. Crunch numbers before moving forward with a loan quote to ensure that the financing terms support an ideal amount of cash flow. If necessary, hold off on buying a property until you have a larger down payment, or consider buying another property if the numbers do not work in your favor. Avoid investing in a property or applying financing that will place you in a tight or difficult financial situation.

Think About Hiring a Property Manager

While there are excellent benefits associated with owning a rental property, investing in real estate is not the same as managing a property on a daily basis. Property management can be a time-consuming and often complicated responsibility that requires your regular time and attention. At times, it may require attention in the middle of the night, on weekends and even on holidays. If you do not feel up to the task, consider hiring a dedicated property manager to handle all aspects of running the property. This individual may market a vacant property, vet applicants, execute leases, address repair and maintenance issues, make your mortgage payment and handle other aspects of management. A good property manager will provide you with monthly updates about the property’s operations and will contact you about significant issues in between the monthly reports.

It can be intimidating to buy your first rental property and to take control of the daily operations of a tenant-occupied building. While this is a new experience that you may understandably feel uncertain about, you can see that there are numerous steps that you can take to ensure that you make savvy decisions along the way. Regardless of where you are in the buying or ownership experiences, spend time walking through these tips. By doing so, you can proceed with sure footing in the weeks and months to come.