Is buying property your best investment? Maybe you’ve seen a house for a deal you can’t pass up or maybe you’ve considered purchasing a rental home for years. Either way, as you think about your first investment property, your mind probably buzzes with questions.
Most likely, these are the questions ringing in your ears.
The Most Common Questions From New Landlords
As we talk with potential landlords, these are the first “should I rent my property” questions. And as you contemplate your decision, we’ve got your answers.
How do I know a tenant won’t destroy my house?
People are first concerned with the way others will treat their home. That’s why tenant screening is the single most important part of the leasing process. If tenants are screened right, the risk of home damage is extremely low.
How much will it rent for?
That depends on the market price. When you work with a property manager, they can pull comps so that you price your house at the right rate.
How long will it take to rent?
A property in good condition at the right price shouldn’t take long to rent. The exact time depends on the demand in the area and how well your manager markets your home.
What about the insurance?
You’ll need a landlord or rental dwelling policy for your home. It’s not the same as your regular owner-occupied insurance policy, so just call your insurance company to get the right rental coverage.
What do I need to tell my mortgage company?
Mortgage companies use a different contract for rental properties. So when you go to apply for your loan, be upfront about your intention to rent the house.
The Questions Landlords Should Be Asking
They may not be the most common questions, but these Q&As are vital to your decision. Here are the questions future landlords should be asking.
How does this investment look long-term?
Look at the big picture. Consider the investment potential, not just from month to month but for the next five years. Then take steps to get the property in a condition where it maximizes your investment over time.
Do the numbers work?
Being a landlord is a business venture, leaving little room for emotion. It’s easy to assume you’ll get top dollar for your house because that’s what you want to believe. In reality, you need to run your numbers at average (or even slightly below average) rates to get the most realistic financial picture.
What are the other costs?
As you run numbers, don’t forget the extra expenses involved. You know to calculate the mortgage and taxes, but you also need to factor in property management fees, vacancy fees, after-tax income, and repairs. Then run the numbers again to see the potential yearly net. Plus, we always recommend that clients keep 1% of property value in an account for potential maintenance costs.
Is there a preferred time of year to rent a property?
Summer months are by far the best time to begin a lease. More people house hunt during this season, upping the demand and dwindling the supply. Consequently, you can charge slightly more for rent. Also, when the tenants move out at the end of their lease, you’re set up for another summer rental contract. During the summer, you’ll get premium rent with fewer days on the market.
Do I understand the local market?
Each market area has its own dynamics. Understanding rental patterns, rates, and key features makes a big difference in the success of your property. You need to understand more than the basic rental process. If you don’t know the local market, find someone who does.
Who’s taking care of the property?
Remember, this is a business, not a DIY project. Using a professional property manager makes the business work.
Can I detach myself from the tenants?
When you use a professional property manager, you break your relationship with the tenants. Unless it’s the error of the company, late fees and eviction timelines are non-negotiable. When an owner compromises those fees and timelines, the integrity of the business slides.
How will repairs and deposits be handled?
These are the biggest sources of lawsuits. Repairs must happen in a timely manner and security deposits have specific timeframes in which they must be returned. If either slips through the cracks, it can break a company. So when you’re looking for a manager, make sure you understand the repair and fee-return process to avoid those issues altogether.
Stay objective as you decide if you should buy an investment property. It’s about the numbers making sense, then making sure you put your home in good hands.
Not sure how to get started buying your first investment property? Give us a call!