When it comes to boosting your personal finances, investments are a powerful tool. Wealthy people find ways to make their money work for them, and it is rare that they rely solely on a direct exchange of money for time. Investment vehicles—places where you can invest your money—are numerous, and you need to give some serious thought as to which are the right ones for you. If you are thinking about residential real estate, here are some tips for purchasing a rental property.
Choose Your Areas Carefully
Everyone needs a place to live, and rental properties are in high demand in general. For this reason,you may think that it is not that it is super-important to carefully choose the areas where you will purchase property, but nothing could be further from the truth. Buying properties near universities is usually a good idea.Many seasoned investors have an affinity for working-class neighborhoods. You should do your homework on rental demand in the various areas you are considering.
Know Local Rental Regulations
Failure to familiarize yourself with local rental regulations can end up being a very costly mistake. In many respects, a residential rental property may be treated more like a business than a home, and this can have a significant impact on your finances in terms of costly upgrades. For example, in some townships, the requirements for ceiling height and size of the bedrooms may be very different for a rental than a personal home. If occupancy is calculated by square footage, a four-bedroom home may only be able to be listed as a two bedroom home for a rental property—this could impact something like how much you planned to charge for the unit based on the number of people likely living there at once. Parking requirements also differ for rental properties versus residential ones.
Look for Simple Construction
As a landlord, you will be responsible for repair and maintenance of the property; at least initially, you should look to homes that have simple construction and can be maintained with relatively standard materials. While you may like the idea of purchasing that stunning old Victorian home, it may be hard to find replacements for the leaded glass windows or other components of the home; slate roofs are nice, but expensive to repair.
Be on the Lookout for Safety Issues
You are investing in real estate to make money, so you would hate to part with any of it for extensive unforeseen repairs, building code violations or a personal injury lawsuit by a tenant. Never buy a property that has not been given a thorough walk-through by a licensed home inspector. He can identify potential safety hazards, how to fix them and how much it may cost you. The four biggies are lead paint, radon, asbestos and mold. Check the stairs, driveway and walkway for any tripping hazards, and make sure there are no open wires, outlets, or electrical circuits that present an electrocution hazard.This is far from an exhaustive list of what to look for, but at least this will get you started.
