In the current economy, it’s a landlord’s market. Prospective owners looking for either a second career or some extra income are in a prime position to make a smart financial move if they find the right house, townhome, or apartment to offer as a rental.
However, the currently lucrative nature of property investment does not mean that investors should put an offer on the first structure they come across. As with any other venture, a property requires a significant commitment of time and money, and investors would do well to make sure they are getting the best returns on their efforts. Here are five critical issues to consider when preparing to put an offer on an investment opportunity.
1. What state of repair is it in?
Unless owners are looking to get out quickly and are billing their properties outright as fixer-uppers, most houses and apartment buildings will be passable from the outside. Unless you yourself are a licensed HVAC technician, a licensed plumber, and a licensed electrician, it would be in your best interests to make sure qualified specialists can verify that the building is ready for use. A water pipe that’s on the verge of bursting or crumbling insulation will mean a drain on your finances and stress levels later on. Also, see the BRRR investment strategy if the property needs a lot of work.
2. Who will be renting from you?
Get an assessment of the area you’re looking in. If it’s near the University of Denver or one of the University of Colorado campuses, you will likely be renting to students. While you’ll have a constant source of new tenants, turnover is high, and since students are not typically in classes year-round, they may not be as willing to sign a full year’s lease. Renting out a home in a suburban area, on the other hand, is more likely to attract a stable couple or a family, but it may be on the market longer while those renters evaluate their options.
3. How many tenants will you have?
With a single-family property, you’ll have an easy time keeping your current job and performing maintenance on occasional weekends. If you’re looking to buy a building with space for multiple tenants, or that you’re planning to convert to such a space, this investment can turn into a full-time job, but it can also provide enough income to make it worthwhile.
4. What are property taxes like?
Snatching up a property in a booming area means a guarantee of eager rental applicants, but if the taxes or HOA fees are high enough, you might only be breaking even in order to make sure you don’t scare potential tenants off with high rent. A visit to the local tax assessor’s office will let you know how much you can expect to pay, and scrolling through Craigslist or the local newspaper will tell you if rental prices in the area will be high enough to cover the costs.
5. Who do you know about maintenance services?
If you’re planning on renting out a single-family property, you’ll be able to take care of many problems on your own with a little know-how. But multiple tenants and multiple properties will probably mean that you’ll want to delegate maintenance responsibilities to someone else while you oversee the business. If you know of a person or service who is willing to charge a flat rate per month to take care of technical issues on your building or buildings, you’ll spare yourself a few headaches down the line.
This is a great time to purchase a rental property. Just make sure you consider both your available time and finances when looking at sites, and your investment will soon be worth what you’ve put into it.
And one more tip, work with an agent that has first-hand and deep experience in the real estate investment market, like me!
I am here for you so don’t hesitate to contact me.