5 pieces of advice for buying rental property
/1. Determine if you're cut out to be a landlord
You need to search deep inside yourself to see if you feel comfortable or perhaps physically safe approaching tenants to ask for money. It is really a matter of when not if you run into a tenant who decides they no longer want to pay rent which will lead to issues. Those are some of the times when you are going to have to be the bad guy, and you need to be confident in your ability to control emotions and resolve conflicts. The financial issues, dirty messes, broken items, for example, will be something to deal with regularly. As the “authority” you will naturally be the bad guy, almost all the time!
2. Find the right locations
Real estate, in general, is about location, location, location! It’s an old saying but it still holds true today. In many cases, especially multi-family units, the buildings will be near industrial or commercially zoned property or near major roadways, railways, and/or other generally unpleasant things homeowners generally will avoid purchasing near. Taking that into account, you should still focus on properties that have easy access, plenty of parking, proximity to recreation, and generally fit the style or architecture of the neighborhood. Doing so should help hold up resale value and rental amounts as well as potentially shorten vacancy times.
3. Determine if you want to offer Section 8 Housing
The Department of Housing and Urban Development’s Housing Choice Voucher Program, or otherwise known as Section 8, is an option you should weigh carefully. Vacancies will hurt, and unfortunately, as a landlord you will have them from time to time. With Section 8, most tenants will pay 30% of their monthly income. HUD then pays the landlord the remaining amount of the rental amount and utility costs. There are strict property condition guidelines to follow but in order to keep from being kicked out many Section 8 tenants tend to be rent for longer terms and keep the property in better condition or they risk losing their voucher in the future. As you can see, there are pros to renting to Section 8, but there can also be cons such as yearly inspections, rental pricing caps and potentially challenging tenants.
4. Networking
There is no doubt you will run into many individuals as a landlord. Developing close connections with city officials, other landlords, local Realtor’s, and contractors will greatly assist you in your journey. Local Realtor’s and other landlords can provide a network of industry connections to keep your properties full and warn you of potentially difficult tenants. Municipalities are widely known to be a thorn in the side of landlords, so consider developing close connections to help fight for your rights as a landlord, to keep current on local government policy changes as well as keeping up to date on code enforcement issues that might affect your properties. Having a go-to group of local contractors will help ensure timely and quality repairs of items that will need maintenance or repair. Staying on top of these issues is crucial to being regarded as a good landlord vs a “slumlord”.
5. Property Conditions
As mentioned earlier, property conditions are extremely important. Consider focusing your purchases to properties with more current mechanical upgrades and needing minor cosmetic updates at a minimum. Completing major renovations will be very time consuming and costly, which isn’t what you get into the business for. For items that may need attention sooner rather than later, get quotes and start putting money aside so you don’t have scramble for funds when it becomes an emergency, as those types of repairs tend to happen much faster than originally expected.