Are You Ready to Be A Landlord?
Think rental property might make a good investment? It can -- if you choose
Just as with any real estate purchase, location counts! Your best
bet for a solid rental property will probably be in an established, high-demand
rental area, with easy access to schools, universities, shopping, and other
amenities. Avoid "white elephant" buildings with an unusual design or location,
or isolated units stuck out in the boondocks. Look for a location that you would
find attractive if you were renting.
Once you select a general area, you'll need to decide whether you prefer single-family homes or
multi-unit apartments. Both can make good rental properties, though there are some
important differences. Single-family houses are often in shorter supply as
rentals. And because they're more desirable from a tenant's standpoint, they
generally command a higher rent per square foot than apartments. A single-family
home will also have a broader resale appeal when it comes time to sell. But it
will be harder to buy a single-family residence at a price that allows you to
break even or generate a positive cash flow unless you're prepared to invest a
hefty amount down.
Multi-unit apartment buildings, by comparison, may
experience a somewhat higher turnover rate than a single-family house. But they
are often priced to allow you to generate a close-to-break-even cash flow with a
smaller down payment.
Thinking seriously about a particular property?
Run the numbers carefully before you decide to buy. Ask the seller for
information about the building's vacancy rate over the last 2-3 years, and
factor in anticipated vacancies when you estimate cash flow. Be sure to include
a reasonable allowance for maintenance. Copies of recent maintenance records can
tell you not only what has been done to the building lately but also what
TIP: For multi-unit buildings, make sure you're given
the opportunity to inspect all units personally before closing, not just a
TIP: During the walk-through, ask the
current tenants if any repairs need to be done to their unit, and listen to any
complaints about maintenance. Unless they're fixed before closing, these are
things you can expect to hear about later!
TIP: Looking for a
bargain? Chat with a REALTOR® whose office also handles rental property
management. They may know of owners anxious to unload a rental at a discount