Investing in Rental Properties

Investing in Rental Properties

If you’ve ever paid rent in your life, you’ve probably wondered what it would be like to be the landlord. I know if you’re anything like me, you probably swore to one day do just that, to become the one making money by placing roofs over the heads of the masses rather than the one spending money that would never present a return on the investment. As I’ve grown and ‘done my homework’, I’ve discovered the being a landlord isn’t quite the bed of roses I always thought it would be.

We all know that investing in real estate is a risky venture. There is the excellent potential for a good return on your investment but the risks are always lurking in the background and if you have educated yourself properly in the real estate industry you are well aware of the risks that abound. Among the many opportunities in real estate investment, rental property continues to be a product that is in steady demand by the population and more and more often in shorter supply. Therefore I would cautiously call this a rather safe investment. I say cautiously because ‘stuff’ happens and anything can go wrong and quite often will.

If you keep a few important tidbits of information in mind while scouting your potential rental investment property you will be reducing your risks ever so slightly.

  1. Make sure you learn the laws regarding rental properties in your area. Each state has different laws about the rights and responsibilities of landlords and tenants. Make sure you are aware of the laws in your specific state.
  2. Location, location, location. It’s not just a saying. It’s actually quite important when you’re considering whether or not to invest in a property for the sake of gaining rental income. College towns are a great place to invest in rental property. Especially if the college has inadequate housing. Also busy streets are better to help you keep your property filled. Drive bys often generate more rentals than newspaper advertisements. Put a for rent sign in the yard and wait for the calls to come in.
  3. Choose low maintenance homes to rent. Vinyl siding is a good thing with rental houses, it requires no paint only an occasional pressure washing. You also don’t want to go top of the line with water heaters and appliances for a home that will see many many renters who care for less for the state of these things than you do. Keep that in mind when making not only your home purchase, but purchases for the home as well.
  4. Make sure the house you are considering for a rental property complies with zoning laws and is up to date on all codes. Have it inspected before you buy and explain what your intention for the property is. It is a very costly venture to bring a house completely up to code, especially if you’re only making a little bit more than the cost of the mortgage payment each month.
  5. Don’t buy a house for a rental if you are counting on raising the cost in order to recover your expense. First of all there is no guarantee that the current rental market will support an increase in rent (then you are making the note on an empty property) and secondly, things go wrong—roofs need replacing, flooring, paint, hot water heaters, and heating units. These repairs can be quite costly and if you’re not making enough each month to set aside a contingency fund for events such as this you may as well shoot yourself in the foot. It would be much less painful.

While there are no guarantees when investing in real estate whether for rental properties or anything else, following this advise will help reduce the risks you are taking. Good luck with your venture, my hope is that it will be a wildly successful one.