“Purchasing a rental property is an increasingly popular way to invest your money. “
Other savings options don’t offer much return on investment; people are looking for a way that they can get involved and make their money do more for them.
The housing market is recovering, and becoming a landlord can be an excellent way to build equity and earn some income.
Becoming a landlord isn’t for everyone, though. Before you make an offer, check out these 8 things you need to know before becoming a landlord.
1. Do you mind getting dirty?
If you want to buy an investment property, it really helps if you have some basic handyman skills, or are at least willing to learn. If you can do a bit of renovating yourself or can manage contractors effectively, you can invest in a fixer upper. After renovating it, you can either sell it or rent it out. Taking on these fixer-uppers that nobody else wants can really pay off. Just remember that this will take some dedication; look at like a part-time job.
2. Hire a property management company
If you don’t have the time or the skills to make repairs and deal with the day-to-day issues of being a landlord, that’s ok. That approach isn’t for everyone. You can still become a landlord, though. You can hire a property management company to deal with all the day-to-day stuff. They will make repairs, find tenants, and collect rent for you. All you have to do is pay a monthly fee and wait for your rent to be deposited into your account.
3. Find out whether your investment will pay off before you buy
Figure out the capitalization rate (or “cap rate”). The cap rate is a measure of the return on investment. It is calculated by dividing the annual rental income by the purchase price. The higher the cap rate, the higher your potential return on investment. However, a higher cap rate also indicates higher risk. You can purchase a cap rate report for more information.
4. Choose your location carefully
Consider all the economic data for the area. An area that has consistently high unemployment is a sign that the pool of renters is small. Instead, look for areas that are forecast to have increasing employment opportunities and growing migration numbers. College towns can offer an excellent pool of renters, too. Keep in mind that if you plan to handle the maintenance of your rental on your own, you should choose an investment property that is an easy commute from your own home.
5. Short sales and foreclosures can be great opportunities for investors
Choose a realtor who has experience in dealing with these kinds of properties. The paperwork can be a hassle, so you need to work with someone who is knowledgeable and comfortable handling these types of sales.
6. You need to have cash on hand for a down payment
You’ll need to make a down payment of at least 20%, because you can’t carry mortgage insurance on an investment property.
7. Find a good contractor before you purchase a property
Taking a contractor with you when you look at properties is a great idea; the contractor can give you an idea of which homes will be financially feasible to renovate.
8. Go to open houses
Even if you don’t intend to buy those particular properties, seeing the insides of homes in the neighborhood can give you an idea of what types of finishes are typical for the neighborhood.
If you are considering becoming a landlord, get in touch with McMath Realty.
We offer a variety of services to assist you in maintaining your property, includinginvestment consulting,property management,rental management,property inspections, and home maintenance services.
We manage rental properties in Chandler, Mesa, Gilbert, Scottsdale, Phoenix, Glendale, and all areas of Maricopa County.
We advertise your property in the MLS listing, on multiple websites, and on our own website. We also use signage to attract potential renters who are out driving around and looking for rental opportunities. We will assess your property, recommend improvements, and help you price your unit appropriately.
Contact McMath Realty at https://mcmathrealty.com//contact.php to learn more about how we can help you keep your rental property in great shape and take care of the day-to-day dealings with tenants!