Buying Rental Properties?

Ready to be a landlord?
Let’s do it! What a great time we live in, and a great market we are in right now for acquiring properties and cash-flowing deals. With the market on the move upward, it is a great chance for investors to start cash-flowing on deals now, and making money on future appreciation of the deals in the years to come. I found a great article that outlines some things that you’d want to consider if you were getting into some rental generating properties. I hope you enjoy and learn from this article as I did.

By: Anne Miller
First-time landlords represent so many different situations: Homeowners who bought a larger place but want to wait on selling their first; Investors who found a great deal on an income-generating property; Urban buyers seeking a home with an extra apartment to help cover some bills.

If you’re a first-time landlord, juggling the needs of your new status is more convoluted than simply signing a few contracts and collecting checks.
Here are five things to consider if you’re pondering going into the rental business — or already have:
1. Set Your Timeline
Some lucky ducks might capitalize on a great purchase deal that will generate monthly rental income well above the building’s cost, but that’s often not the case. Renting out a home or apartment may pay in the long run — 30 years from now, when the mortgage has been paid off, or even 10 years from now, when the market has rebounded. Don’t count on necessarily paying for an annual beach vacation off your rental income. Turning a rental profit is a marathon, not a sprint.
2. Do the Math
You’ll need insurance for your rental property. Uncle Sam takes taxes. You might want to have an attorney who can advise you about your state’s legal requirements for landlords, and who can be on call should a problem arise with a tenant. And you’ll be responsible for fixing anything that breaks in the rental unit — by yourself or by hiring a management firm. Ideally, the market will allow you to set the rent high enough to cover all of your expenses. Budgeting for your expenditures will demonstrate how much of that monthly rent you’ll need to set aside for upkeep, and how much you can pocket.
3. Create a Checklist
What do you need to do before every new tenant moves in? Some rules differ by location. In New York City, for example, landlords are required to repaint the walls every three years — if a tenant moves out before then, they may have to pay for part of any repainting. Turnover marks a good time to review anything that could be a potential hazard (Is the stove functioning properly? Does the fireplace flue need cleaning?). Make the list once, and you will have organized yourself for years to come.
4. Forms are Your Friends
The Internet abounds with sample contracts. Use them. The more you detail at the outset, the smoother your rental will run. One blogger uses the example of a renter trying to pay for a month with quarters. Not what you want? If you spell out your preferred payment method in advance, then you don’t have to worry. And if something should go wrong, such as a late payment, you can point to the contract that stipulates the renter owes a penalty fee.
5. Be Picky
Don’t rent to relatives. That’s one way to quickly tank a relationship. Acquaintances, however, and especially work colleagues, can end up as fantastic renters — responsible, friendly, but not overly demanding or expecting of favors. If renting to strangers, ask about their previous rental history, why they are moving, where they work, and their income. Call their previous landlords. Verify as much as possible. You cannot legally discriminate against race or religion, but you don’t have to select the first tenant who puts in an application. In some cases, landlords will even lower the rent a little to entice a trustworthy tenant rather than max out their dollar — and their headaches.
Happy Investing!
Matt W.