With demand for rental properties on the rise, you’d be justified in thinking of buying a house and renting it out. However, there are definitely dangers to the proposition.
A lot of things can go wrong when buying a house and renting it out. You can overspend on your investment, choose the wrong property for your purposes, and so on.
All of that would represent money down the drain. That’s why it pays to be as meticulous as possible in considering your options when buying a house and renting it out.
To help all the property investors out there, I’ve put together a shortlist of the top tips I’d want to know if I were buying a house and renting it out.
These are tips that have helped me immensely over the years too, in my own real estate and rental property investment.I’m sure they’ll do the same for you as you set out on your own path to becoming a rental property owner.
What to Know About Buying a House and Renting It Out
When buying a house and renting it out, you have a long list of things to consider. It ranges from your budget to your intentions for the property.
Regarding the latter, it’s not enough to just know you want to rent it out either. You have to figure out such things as who your target tenants are and what you’re willing to spend on its maintenance.
Because of this, buying a house and renting it out may often seem like an impossible idea to many investors. They get overwhelmed by the many factors to consider and eventually just give up on the notion.
Fortunately, as I said earlier, I’m here to help. I’ll do that by supplying 5 of the most important tips you need to know when buying a house and renting it out.
If you’re ready for that, let’s get started with them!
1) Do Your Arithmetic
This is just my way of telling you to get the numbers right when buying a house and renting it out. A lot of people don’t and end up with properties not nearly as profitable as they had hoped.
Some parts of this exercise are fairly self-explanatory. For instance, you want to compare house prices when deciding which properties to buy.
A good way to do that is to look for other properties in each area and noting their prices and condition compared to the one you’re interested in.
That can help you enter price negotiations from a stronger position, if you want to bargain down.
That said, you also need to look at what other rental properties are charging in the same neighborhood. Check the classifieds for rentals in the area or do a quick survey.
Now consider those figures against your estimate of monthly costs for the property (that may include things like the mortgage, utilities, maintenance costs, or property tax).
Is the difference sufficient to give you decent profit? Will it be enough to tide you over during those inevitable vacancy periods?
Knowing the answers to questions like these is important when buying a house and renting it out. It helps you determine the best property to acquire, from a practical standpoint.
2) Prefer Single-Family Homes
This is because I’m assuming this is your first time buying a house and renting it out. The thing is, single-family homes are probably the easiest way to enter this business.
That’s because they simplify a lot of the tasks involved. There’s only one tenant (or a united group of tenants), for instance, so that means you won’t have to handle multiple concerns at once.
You won’t have to monitor too many renters or even rent payments at once. You also won’t be called upon to arbitrate if tenants end up in conflict with each other.
It also means property use is lighter, overall. It may lead to lower maintenance and repair costs, as a result.
In sum, the single-family rental home is the perfect property on which to cut your teeth as a novice real estate investor and landlord. Try it out before you leap to larger properties, like multi-family properties.
3) Prepare Your Marketing Plan Early
Here’s the thing a lot of experts do when buying a house and renting it out — they actually start developing their marketing plans for properties even while in the process of buying them.
Why? For the simple reason that they know it’s important to get tenants as soon as possible for such rental properties.
You see, the longer a rental property goes vacant, the longer it eats at your cash flow without bringing in anything in return. That’s why it’s vital to fill it ASAP.
This tip may be handy too when trying to choose properties. If you look at a property and can’t come up with a marketing plan to get tenants for it, that’s probably a good indication that it’s not a good buy.
Instead, prefer the properties you can see yourself marketing when buying a house and renting it out. If you think you can convince someone to rent it, that’s always a good thing.
4) Walk the Neighborhood
Do your research and get a feel for a neighborhood before buying a property in it.
That means both walking in it and interviewing its residents as well as doing some research on its demographics and economics.
In general, the best neighborhoods for those buying a house and renting it out are those that are transitioning. There are some absolutely fantastic deals on properties in these areas if you’re buying a house and renting it out.
That’s because you can usually get fairly low prices on houses in them while expecting their value to rise in the future. The same goes for recently-gentrified locations.
Such places also usually have no shortage of would-be-renters. That can help you keep vacancy rates down after buying a house and renting it out.
5) Look for Outdoor Space
Does this sound like a weird tip for buying a house and renting it out? Well, it’s not.
The fact is, the majority of potential renters for houses prefer ones with outdoor spaces. Whether it’s because it gives them the sense of a more spacious property or because they enjoy nature, it’s an established preference.
In short, if your competitors in the area are renting out properties with outdoor spaces whereas you’re renting one without such spaces, you’re likely to lose.
Try to make sure the outdoor space is in good state, of course. It wouldn’t be wise to get a property whose outdoor space is such a shambles that you’ll have to invest thousands just to make it presentable.
Take note too that it’s always a bonus of the outdoor space in the property can be used as a parking space. This is another thing the vast majority of renters would prefer to have.
It may be more or less important depending on your market, though. For instance, if the property is in a place that has easy access to public transport lines, parking space may not be as important.
That being said, it’s still better to have as an option than as an omission — so consider it!
Final Thoughts on Buying a House and Renting It Out
That concludes my list of the top 5 things to consider when buying a house and renting it out. Keep these in mind when you start looking for properties with which to start your business as a landlord.
Let’s go over them again, very quickly.
First, crunch the numbers when buying a house and renting it out. This can help you ensure maximum ROI and the soundness of the property you buy.
Second, look for single-family homes in particular. These are the easiest to manage if you’re new to the property rental business.
Third, start thinking about how to market properties as early as the buying phase. It may even help you figure out which properties are worth investing in… as poor ones will be hard to market.
Fourth, get to know the neighborhood of a property before you buy it. You want to be certain that the neighborhood is headed the right way (progressing) so that you make the most of your investment.
Finally, look for properties that boast an outdoor space when buying a house and renting it out. This is because most tenants want it in the property description.
Remember these when buying a house and renting it out, and you should do well. If you have any more questions about buying a house and renting it out,
Professional property managers can assist with every aspect of managing rental real estate that you despise, from handling tenant disputes and non-payment of rent, being available 24/7 for emergencies of all sorts, providing insight on landlord-tenant law and, of course, facilitating everything from routine maintenance to major renovation projects.
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