4 Tips For Buying A Good Rental Property With No Experience
Maintaining a rental home or vacation property can serve as a relatively easy income source or it can add a lot of stress to your daily routine. The quality of the property you invest in plays a large role in determining whether you have a good or bad experience as a landlord. Before you rush out to invest in your first rental property, consider these four tips to help guide you to the right choice:
Avoid Flipping
No matter how handy you are, it takes a lot more labor and materials than you think to renovate an older home. An investor's very first rental property should need just basic cleaning and very few repairs or upgrades to make it attractive to buyers. You will spend more upfront for this kind of property, but you'll be able to fill it immediately and start earning income to set aside for repairs instead of shelling out more and more money while still waiting to complete the repairs.
Prepare for High Taxes
If you already own a home in the area you're going to buy a rental property, you'll be surprised the first time you open your tax bill on your second property. Most states discount property taxes on a homeowner's primary home by nearly half as a homesteader's exemption, and primary homes also fall under tighter caps on total tax amounts. Your rental property won't get that discount and falls under a higher tax cap, resulting in bills that can be 300% higher or more than your usual property bill. Checking the projected taxes on properties becomes much more important after you realize this fact.
Consider the Job Market
Good tenants who pay on time need good jobs, preferably without a long commute. Finding a rental property that is close to the area's best employers makes it easier to find tenants in the first place, but it also gives you an advantage at finding employed tenants with the money to keep up with the payments over the course of the lease.
Skip the Luxury Models
It's tempting to splurge on the nicest home you can afford with the idea that it will earn a higher monthly income and therefore pay itself off faster. However, you'll also spend a lot more money keeping the luxury level up to keep your tenants happy. Fancy carpeting and high-end features like a jacuzzi require more maintenance to stay looking and acting new, so a more mid-range home tends to pay itself off faster due to lower ongoing costs.
Contact a realtor that can help you buy a property for more information and assistance.
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