If there was ever a time to invest in rental properties, it’s now. According to an article from realtor.com, the rental market has grown every year for the past 10 years and the share of Americans renting is at 35%, a 20 year high. While those numbers are very exciting for potential would be investors there are several factors that need to be taken into consideration before making the leap into investing in rental properties.
First off any investor looking at buying a long-term rental property should first calculate how much they intend to charge for rent. Often times landlords will look to charge rent that will at least cover their monthly mortgage as well as taxes and insurance. Compare your potential property to other rental properties near you with a similar number of bedrooms, bathrooms and a similar square footage to get a sense of what the typical rent is for your area.
Once you have your property and determine your rent it’s time to start screening potential tenants. Choosing a good and reliable tenant is extremely important when renting out your property and can save you from many potential headaches. There are several ways to screen tenants such as checking their previous employment history, credit history, income, and if possible obtain references from past landlords that would give you a better picture of what type of tenants they’ve been in the past.
Another key question for potential investors is do you want to hire a property manager? Property managers typically charge anywhere between 4% and 12% of the monthly rent, according to the same realtor.com article, but they are experienced and have the skills to handle any problems that may occur with a property such as a broken dryer and any other maintenance issues. If you have experience and are confident in being able to fix any of those problems then you be fine managing the property yourself and saving on those expenses, if not then it may definitely be worth it to hire someone who can save you time and in the long run money by managing your property for you.
If you feel the need to hire a property manager then you need to make sure it’s the right one. Find out the types of hours that they work, if they only work during the week could you handle any problems that might arise over the weekend? If for whatever reason the rent isn’t paid on time do you trust them to be able to resolve the issue and make sure your payments are correct and on time? These are just a few things that you need to consider when hiring a property manager.
Investing in rental property is a great way to make passive monthly income and can help you achieve the lifestyle you’ve always dreamed of. There has never been a better time to invest in rentals and the market should only continue to grow and improve as more and more Americans are living in rental properties.