Nobody said investing in a rental property was easy and it’s not a decision that should be taken lightly. Though it’s something that can boost your income in a big way, there are certainly things to think about before getting started. After all, investing in a rental property is a big undertaking. Before you throw yourself into being a landlord, here are key three things to consider.
- There Will Be Unexpected Costs and They Quickly Add Up
It makes sense to choose a property that tenants will want to rent, but don’t focus too much on the aesthetics as it’s not just what’s on the outside that counts. A great looking property will draw the attention of potential renters, but underlying problems can be costly. Before you go ahead and purchase a rental property, get to grips with every aspect of it. Find out how old certain elements are, such as the HVAC unit and kitchen appliances, and think about when they will need replacing and whether it’s a cost you can afford. You don’t want to be left with a tenant without hot water, but with no money to fix the problem. It’s impossible to predict problems that a property could have in the future, but choosing a property that’s as up to date as possible does reduce the risk of these being costly.
You should always set aside some money for emergencies, but there is other information out there that can help to estimate the cost of future repairs. For example, have an inspector give the property a thorough once over and consider what they found. Though you will have to pay for an inspector, doing so will highlight any potential major costs before you finalise the property purchase. One of the major drains on a landlord’s budget is the roof, so find out when the roof was replaced before buying the property. Roof repairs can be just costly as paying for a brand new roof.
- Tenants Will Contact You At All Hours
As a landlord, tenants will expect you to be there whenever they need you. If you’re sleeping or busy, they don’t care! If you are thinking about investing in a rental property, prepare to be contacted by tenants out of office hours and at inconvenient times. To avoid this stress, a lot of landlords enlist property management companies. When you are looking at properties, take the time to look into property management services. Though these services do come with an additional expense, they are hugely beneficial. Rather than having to deal with maintenance calls 24/7, you can hand everything over to a property manager. They also deal with maintenance, repairs, advertising the property, handling any evictions, screening tenants, running background checks and they also ensure you are meeting all compliance regulations.
- It’s All About Location, Location, Location
You may have found the ideal rental property, but it won’t be a good investment if it’s located in a bad neighborhood. Avoid neighborhoods with high crime rates, low rental prices and a lack of jobs. These neighborhoods are notoriously bad for rental properties, which can leave you with a lot of stress as a landlord. It’s important to find a property where tenants will want to live, otherwise there is a high risk of the property being unoccupied for long periods of time. Choose a neighborhood with a low crime rate, good schools, a good average income and a range of local amenities. You’ll want a neighborhood with good average rental prices, as this will give a clear indication of how much you can charge for rent. It’s also helpful to think about whether property values have increased in recent years, as you may want to sell in the future.
As well as thinking about the specific home you want to invest in, think about the neighbourhood and any additional costs a property could bring. There are a lot of good reasons to invest in a rental property, but planning ahead is key to becoming a successful landlord.