Considerations When Selecting And Buying A Rental Property
Buying a rental home is a good way to invest for your future and retirement, and it allows you to provide clean and quality housing to renters in your area. But becoming a landlord as a rental property owner is a decision you don't want to take lightly as to not make a bad decision. Here are some questions to ask yourself and consider when you are hunting for the right single family homes for sale to buy and rent out to tenants.
Does the Property Have Positive Cash Flow?
One of the most important items to consider in buying a rental property is to make sure the property will have a positive cash flow, or in other words, its rent will cover the property's expenses and your time you put into it. You can do this with a simple cash-flow analysis by writing down the rent you would be able to charge on the property and subtracting out expenses, such as your mortgage, utilities you are responsible for, property taxes, and possibly a business license to own and rent a home. Plan for a monthly allotment to take care of any unforeseen repairs or damage to the property.
What is Your Distance From the Rental Property?
When you begin shopping for a property, take into consideration how far away from your home or work the property is located. Keep in mind you will need to be able to travel to the property as much as necessary to handle the landlord and management tasks. For example, you will need to go to the property to show it to prospective tenants, to complete any repairs, and to take let professional contractors into the home before it is occupied.
Is the location of your rental property too far away for you to realistically drive there whenever necessary? Think about the drive time to a property and back to your home or work when you look for potential areas in which to buy a rental property.
Will You Hire a Property Manager?
If you choose to buy a property that is some distance away and you realize you don't have the time to handle the property management of or the drive to the unit, you can consider hiring a professional property manager to do the work for you. Know that the services of a professional property manager will take some extra cash out of the property's cash flow, so make sure the rental income can cover it.
For a single-family home, you can expect to pay around 10 percent of your monthly rent to the property manager as their fee each month. If you choose to use a property manager, do your homework before hiring a management company to make sure they are professional and experienced in what they do.