Investing in a rental property is one of the best ways to create passive income, but it takes some research and know-how to really get the best bang for your buck. If you’re interested in purchasing your first investment property, The Terrace Experts present some steps you can follow for greater success.
Start with a Clean Slate
Buying any property, whether it’s where you’ll live or a place you’ll rent to tenants, requires a good chunk of change. This means you want to get rid of any current debt, including student loans, car payments, or unpaid medical bills. In some cases, a high debt-to-income ratio can keep you from even getting a loan in the first place, so make sure your finances are in order before you consider investing.
Choose a Good Location
The location of your investment property can make or break your return. It’s essential to look into vacancy rates in a neighborhood before you make a purchase to determine whether you can keep your rental filled the majority of the time. This is especially important if you are contemplating a multi-family property because a high vacancy rate in the area you’re considering means that units are not being rented out. The lower the vacancy rate, the better.
Understand Your Legal Obligations as a Landlord
Every state has its own laws regarding the landlord-tenant relationship. These laws are in place to provide protection to both parties. Before you become a landlord, you should understand what legal obligations you are taking on, including the following responsibilities:
● Managing tenants’ security deposits
● Disclosing information about the property owner
● Keeping the units vacant and ready for tenants on move-in day
● Maintaining the rental unit
● Adhering to lease agreements
Not following your state’s laws can result in legal action against you, which you want to avoid.
Set Up a Rental-Management System
If you’re new to property management, it is important to set up a system that keeps you organized. Luckily, there are different apps and online programs you can use to collect rent, track repairs, process new tenant applications and sign rental documents electronically. Utilizing technology can help you stay on top of your investment so you don’t feel overwhelmed, and your tenants remain happy with you as a landlord.
Consider Hiring Out Property Management
Some investors like the idea of putting their money into rentals, but they don’t want the headaches of becoming landlords. If this sounds like you, it may be wise to use a property management company rather than handling the details yourself. This business takes over management services so you don’t have to be at the beck and call of your tenants. Instead, you can turn over everything from listing, choosing, and filtering applicants to collecting rent.
Obtain Landlord Insurance
Purchasing landlord insurance should be one of the first things you do when you invest in a rental property. This insurance is designed to protect you from financial loss, and it typically includes both property and liability coverage.
Investing in and managing a rental property can be a great way to earn a passive income if you do it the correct way. With these tips in mind, you can start looking for the right single-family or multi-family dwelling to help meet your financial goals.
The Terrace Experts buy and sell Manhattan terraced real estate like never before. If you’re interested in owning one of these properties, give us a call today at 212-906-0504.
Published by Katie Conroy