Buying A Rental Property? Consider This
Buying real estate for renting purposes is a subject of many debates. While many investors believe that such property has a great ROI (return on investment), others find a variety of negative points, which seem to prevail.
When you are renting out a property, you have to worry about maintenance, deal with tenants, and make sure all the laws are observed. This takes up time and money while creating many stressful situations. Meanwhile, the short and long-term income you get in return is a wonderful additional source of peace of mind. In order to end up with a steady income, you need to consider several things before investing in a rental property.
Financing Is Different
Financing is a major part of purchasing any property. When you are looking to finance a rental property, the process is different when compared to owner properties.
At first, you need to come up with a higher down payment of up to 30 percent. The requirements for getting a credit for rental properties are stricter. For example, you need to have a credit score of at least 700. Some lenders may ask for 720 or higher. The money for the closure needs to stay in your account for at least 60 days before the deal.
Managing Is Complicated
Managing a rental property is an art you have to master. Before buying such property, think about how you will manage it. The right management is the key to steady income and less stress. There are several managing options available:
- Self-management– It can help you save money on the third party manager. However, you need to be always available to solve property-related questions. You’ll need to deal with all the complaints and maintenance issues personally.
- Hire a manager– An experienced manager’s services will cost you some money but you’ll save plenty of time and nerves on the managing matters.
Hiring An Attorney
You don’t need an attorney to close the deal. However, hiring one is a smart move if you want everything to go smoothly. Even if you seem to do everything right on your end, you may miss some hidden problems, which can cancel the deal.
An experienced attorney makes a big difference, saves you time and money, and gives you a peace of mind. He or she will check if the property you are buying is fully legalized and prevent you from making unfortunate mistakes.
Finding An Insurance Agent
Finding a good insurance policy for your property offers you extra protection. An insurance agent knows all the ins and outs of the business and can help you find the best policy for your property. Don’t try to go for a cheap policy. Saving a hundred bucks a year is not worth the thousands you may need to pay in case a real problem arises.
Planning For Maintenance
Having a person, who can help with maintenance, will simplify the handling of the rental property. You can start by finding a person, who has experience handling minor maintenance issues, such as broken doorknobs and clogged toilets. Then you need to find companies that deal with roof repairs, snow shoveling, and landscaping.
Don’t wait until the problem arises to find these people/companies, plan for them in advance. You can check with other rental property owners for a list of companies that provide such maintenance services.