Some individuals will purchase homes to flip- that is repair/remodel and then turn around and sell. Others will purchase houses and do the repairs/remodels and then hold on to them and rent it out to tenants.
When you are buying a house to rent out, there are a few things that you must know. Renting out a house has lots of risks and headaches. However, as long as you set it all up right, it can help you bring in some pretty great and steady income.
Here are some tips on choosing a house to buy to use for rental property. Most of the features of a rental property could also help you when, and if, you ever decide to sell the property.
Buying a House to Rent Out:
When you’re looking at purchasing property to rent out, you must first seek pre-approval for a mortgage loan. Discuss with your lender about any special programs that are available for investors, such as an adjustable rate mortgage that will vary after you own the house for five years.
If you plan to purchase the house with cash, you can, of course, skip the lending step and the entire process will be that much easier. You will simply need to go to closing with a certified cashier’s check in hand with the total amount- including taxes and title fees- you can obtain the final figure from the realtor or by contacting the title company.
When you’re seeking rental properties, consider homes such as duplexes/multi-plexes, row homes, townhomes, and even smaller single family homes. These types of properties tend to be much easier and much more cost-effective to rent out.
When you make your final choice, make sure that you have chosen a home that is reasonably priced. This will take a little bit investigation on your part. Take the house price and the estimated interest rate on the home loan and enter it into a mortgage calculator in order to get the total monthly mortgage payment. Then, ask: will I be able to make this payment if I don’t have a renter?
When you make your final choice, make sure that you have chosen a home that is reasonably priced. This will take a little bit investigation on your part. This is the stage where you will have to get professionals to inspect the costlier sections of a house and provide estimates for repairs. According to the pros at Jayhawk Exteriors, “Areas of concern include the roof, foundation, HVAC, plumbling, electrical, sewage, and water systems.” Take the house price, cost of repairs, and estimated interest rate on the home loan and enter it into a mortgage calculator in order to get the total monthly mortgage payment. Then, ask: will I be able to make this payment if I don’t have a renter?
Look around at other rental properties in the area and find out what the average rental prices are on the home or unit that you’re considering purchasing. You can visit Craigslist.org in the “For Rent” section of your local area to find out what people are paying for rent, or you can look at the local newspaper or other home listing guides.
Additionally, your realtor can give you guidance in this with the special tools they have at their disposal.
Then, compare the monthly mortgage payment with what you expect to pay in rent to figure out whether you’d be able to make a profit, you’d simply be breaking even, or if you’d actually be taking a loss. Of course, if you’re going to be taking a loss or barely break even, you will want to rethink the property and keep looking.
If, however, you find that you will be able to make a profit, you will want to proceed with your purchase, finalize all of the loan paperwork, and sign the sales agreement through the realtor with the seller of the property.
Finally, go to the closing to have the deed transferred into your name and get the keys to your new rental property. You will agree upon the date of closing with the seller. You have now officially bought a house to rent out- now comes the fun part!
Now that you have a home to rent out, you will be able to start placing advertisements in the local classified ads. In order to maximize the audiences, you can advertise on the Internet using any one of the popular free-listings (such as Craigslist). You can also place and advertisement in the local newspaper or possibly the local visitors’ center.
Make sure to take care of any repairs or remodels that need to be done to attract renters to your property. You will likely need to clean the entire house, do some repainting, and repair fixtures. You will definitely need to make sure that any safety issues are taken care of before you have renters move in to your property.
Is Renting Out Houses a Good Investment?
It is true that investing in rental properties can offer some passive income and substantial profits. This offers lots of possibilities for profit and gives you a steady, monthly income.
However, keep in mind that purchasing rental properties isn’t always as easy as you may think. You must make sure that you understand how to make your rental property investments successful and figure out whether or not a particular property is a good investment and will meet your needs as an investor.
You will want to make sure that you purchase a home in the good neighborhoods in order to have a profitable investment. Your tenants will not want to live in areas with poor services, high crime rates, or a bleak economic outlook.
Areas that have stable employers such as universities, government offices, and hospitals along with a wide variety of smaller employers will offer a steady supply of desirable tenants. A good thing to keep in mind is to never purchase a rental property in a neighborhood that you would not live in.
When you’re interested in buying a house to rent out, you will need to make sure that you thoroughly inspect the property to figure out the value and condition. There might be some local regulations that offer special conditions for rental properties- so consult with the authorities in the area to find out these regulations.
If the house you are purchasing is currently being used as a rental, then you will want to look at the past rental records and find out the amount of rent that the house is currently producing and how often and how long it was empty between rentals. These are very important factors in determining the ability of the property to generate a positive cash flow.
As a rental property investor, you may want to consider using a property management service to help you to choose and deal with tenants. The property management service is familiar with the local regulations regarding issues between tenants and landlords. If you’re new to the business, these regulations can be quite confusing and difficult to follow.
Finally, when buying a house to rent out, you will most likely want to work with a tax professional in order to be successful with your rental investment. Your rental properties will provide you with tax breaks that will increase the profitability of your investment.
Some of the breaks include deductions for mortgage interest, depreciation, and repair costs. Additionally, you can also write off accountant fees, property manager fees, contractors, as well as other professionals that work with you in your rental business.
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