What to Consider Before Buying Investment Rental Property

When you start considering investing in rental property, the normal focus is only on the purchase price of the property. A common belief is that once the property is purchased, the hard part is over. Actually the reverse is true. The easy part is the purchase, the hard part is after the purchase. Before you sign on the dotted line, here is what to consider before buying investment rental property.
Don’t assume that every rental property will produce enough income to pay for the mortgage. You must research your purchase price, the rental rates in your area, and normal vacancy rates. If you are needing the property to pay for itself, do your calculations carefully, and add a little bit of wiggle room to make sure you’re covered. It can be a terrible feeling to buy a property expecting to see income, and instead having it pull from your savings every month.
Don’t overlook planning for unexpected expenses and maintenance costs. You must have enough extra income each month to set aside to cover these costs. Ignoring these likely costs, will have your income property becoming a money drain. You must plan for both normal expenses, and set aside money for the unexpected to protect yourself.
What kind of rental property do you wish to own and maintain? Single family homes have higher rental rates. When you have many family rental homes, you could be spreading yourself thin, just moving between properties for maintenance items, collecting rent, and showing homes. Single family homes may be the easiest to resell when you decide to exit the rental business, or want an influx of cash for other projects. Duplexes and other smaller multi-tenant dwelling reduce your travel, and still offer excellent rental rates. Apartment complexes move most of your management, maintenance, and other jobs into one physical location. With the increased number of tenants, you can expect more phone calls, more odd jobs, and higher turn over of tenants.
Choose the style of rental property which best matches your work desires. If you don’t mind getting around the town every day, single family units might be your perfect choice. If you prefer to work in one location, an apartment complex could be ideal.
Learn the regulations and rules for rental property in your community. Not following the legal guidelines can land you in hot water very fast. Not only will you lose valuable time, but you could expend major amounts of cash in fines, and legal fees. Staying on top of the rules, is worth the time you invest. Consult with a local real estate attorney to make sure you are covering all the bases with your lease and rental agreements.
One other professional you should call on before spending the first dime is an insurance agent. Find one who specializes in rental properties, and discuss property insurance to protect your investment from natural disasters, vandals, and other physical damages. Also, make sure to cover the liability insurance. You could be liable for any personal injury accidents on the property, and you must have adequate insurance to protect yourself, and your business.
Before you make your initial investment, plan out all of these critical components of your rental business. With a plan in place, you are ready for buying investment rental property.