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Rental properties are becoming extremely common in the world we live in today. Many people are realizing the huge profits they can make from rental properties, and the need for these rentals isn’t going away any time soon. If you’ve ever wanted to be a landlord and rake in some cash on the side, you’re not alone. However, buying rental property isn’t always easy and there are some things you should understand before getting the keys to your new home.
Make Sure You’re Ready
The fact of the matter is, owning rental property is harder than it looks. From insurance and laws to home repairs and dealing with tenants, it can all be a very time-consuming and stressful job owning a rental property. And if owning property isn’t your full-time gig, the process can be even more difficult. Make sure that you do your homework and that you’re prepared for anything that can happen regarding your new property. Research everything that needs to be done for a rental owner, then also look up how to manage tenants properly. Also, managing a property takes a lot of time and energy, especially if it’s your first time. It's also important to have the right schedule while managing a property. While you can still have a full-time job, you should have the flexibility to meet with the tenants and take care of repairs or issues when needed.
Keep a Proper Budget
When owning rental property, you’re owning a home that can see damage, which can be very costly. And if you don’t have the money to handle repairs and disasters when they strike, then you could have a home just sitting there with no tenants interested. This is why you should always budget for the unexpected. Some examples of what can go wrong include:
Be Cautious of a Fixer-Upper
While you’ve always had a dream about buying a fixer-upper and creating something incredible, this dream doesn’t pan out for many. That’s because many of these people bite off a little more than they can chew, and they don’t have the time, energy or resources to really build something profitable. Therefore, you should be very cautious before trying this method for yourself. It is possible to make money from a fixer-upper, but it takes tons of work and can be very difficult, especially if you’re buying your very first rental property. Dealing with one of these properties might require spending thousands on materials, hiring professionals, dealing with plumbing issues and possibly dealing with structural damage. While you may be very tempted, try looking for a property that needs a few simple renovations and one that is priced below market value.
Preparation is Key
Before you jump into buying a rental property, consider the three tips outlined above to have confidence throughout the process. This will ensure that you're well-prepared for what's to come. Fixing a home, dealing with tenants and paying for insurance can all be stressful, so it's best to understand these responsibilities before purchasing a rental property.
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Purchasing a home for the first time is often a daunting task. There are many things to know and a plethora of conflicting advice. If you’re new to real estate and the home-buying process, keeping these tips in mind can help make the path to homeownership smoother.
Pick the Right Person
Choosing a real estate agent that specializes in helping first-time homebuyers can relieve some of the uncertainty you might feel. You must seek professional help when buying a home because you need someone to watch out for your interests. A buyer’s agent only works for you. They do not represent the seller, so when it comes to negotiating, they are committed to your best interest.
Remember that your agent does this for a living. That means they are licensed by the state and maintain that license. The information they give you is for you, in your situation. Work with your agent exclusively and don’t keep them in the dark about what you want. You won’t make a better deal with the seller by excluding your agent, and since you have a contract with them, you may set yourself up for legal action if you do.
Choose the Right Lender
Apply to several lenders to find the best loan at the best rate for you. Many lenders offer first-time buyer programs that give preferential rates to buyers that attend classes or go through a seminar. Choosing the best lender means the difference between closing the purchase on your home or losing out. Your experienced agent helps you differentiate among lenders, but check with your bank or credit union as well, since they may have a better arrangement for you.
Follow Through on Paperwork
In the end, much of the process comes down to you. You’ll be asked for a lot of paperwork, and the sooner you turn it in, the better your chances of a timely close. Keep track of other paperwork too. Your agent handles the contracts and submissions to the seller and the lender, but you need to read them and ask questions about anything you don’t understand.
Know Why You’re Buying
Back in the day, buying a home for a tax deduction as a financial tool made sense. But modern tax laws make that less of an incentive. If you’re buying a home to lower your tax bill, you might be disappointed. But when you’re purchasing a home because it is where you want to live and you want to make it yours, you’ve got the right idea in mind.
Talk to your real estate agent about what you’re looking for in your first home and start on the path to owning your own home right away.
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Whatever your priorities are, before you take on the purchase of a home, answer these questions for yourself:
- Why do you want to purchase a house? Is it for financial reasons? Is it less expensive than paying rent? Until you’re certain about your reasons for buying, take it slow and make a plan. It’s your money, your time and your effort that goes into maintaining a home. Buying for the wrong reasons leads to buyers’ remorse and dissatisfaction.
- Where do you want to own a home? Is extra land important to you? Or, do you want to be near other family members? Farther away? Can your lifestyle support the commute? Buying a house that requires an extensive commute changes your life in ways you may not foresee. Moving away from friends, entertainment and shopping areas you enjoy can tarnish the pleasure of a new home. Pick your location based on what you want most, even if it means a smaller house or less land.
- What type of home do you want? Do you prefer a maintenance-free condominium with a view? A single-family home in an HOA-controlled neighborhood? A townhouse with an attached garage and street-level entry? Be clear about what living style suits you. If hearing the neighbor’s alarm clock raises your stress level, a flat-style condominium or attached townhome might not be the best option for you. A duplex with only adjoined garages could fit the bill nicely though. Let your agent know which things are deal-breakers and which are merely preferences.
Once you decide, with absolute certainty, what you want, you can set about finding just the right home in the best location at the correct time and for the optimal price. When it’s right, you’ll know it. Start by finding the right agent. Reach out today for a consultation.
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Before you commit your hard-earned money to a luxury home, make sure you know what you're purchasing. Just because a house has a high price doesn’t mean it’s truly luxury. A luxury home is built better and has more space and amenities in it than other homes. Even a home with the same number of bedrooms as other houses could be a luxury home, but the bedrooms are going to be larger, plus they will have more closet space – usually walk-in closets – and each bedroom might have its own bathroom. Other signs that a home is really a luxury home include better appliances, the best fixtures and additional amenities as space allows, such as a pool, an external game room and a larger garage.
Check the Neighborhood
If other homes in the neighborhood are in the same price range, you are likely buying a luxury home. However, be careful as some neighborhoods are just more expensive than others, but that doesn’t mean the homes are luxury homes. It’s easier to tell a luxury home that is in the suburbs because those homes usually have more space for pools and additional out-buildings.
Check the Interior
In addition to the items mentioned above, check the quality of the materials. Flooring, including carpet, should be top quality. Cabinets should be wood cabinets. If the house has crown molding, it should be good quality – and more than just a strip tacked where the wall meets the roof. Countertops should be of high quality if not marble. Look at window frames and door jambs to see how well they are put together. And the windows should be at least double pane windows, if not triple pane.
Financing
Be prepared to jump through some hoops to get financing. If the price of the home is above a certain amount, you’ll need to qualify for a jumbo loan. That amount changes depending on your location. It may also change every few years. Your real estate agent and mortgage lender will be able to tell you what the conforming loan limit is for your area.
Get it Inspected
Just because you are buying a luxury home, it doesn’t mean that it doesn’t have problems. Always hire a well-respected inspector to inspect the home before you close. The inspector will check for plumbing, electrical and structural issues, will make sure everything works properly, will let you know if he or she sees signs of wood-destroying organisms and other problems. In addition to a home inspector, always have the home inspected by a pest control company for termites and other critters that could damage the home.
Negotiate
Home prices are always negotiable, especially if the inspectors find problems. Ask your real estate agent for a list of comparables so you know if the property you're considering is priced appropriately.
