When I was graduating college, (don’t bother asking when, exactly…) my college invited a famous alumnus who was also the state’s wealthiest man to speak at coronation. This man was famous for his thriving agricultural business, especially potatoes and sugar beets, but the only advice he gave us graduates was not to start a agri-business like he had. No, he gave one piece of advice and it was simple: buy property. He said “if you buy property (real estate) and hold on to it, you will have all the money you’ll ever need.” Now, there are many exceptions to his claims, but he is not wrong for the most part: Buying property, especially land and houses, is one of the single best investments a person can make, aside from investing in Apple at $22 back in the 80’s. (If only!) Now, let’s take a look at some of the top industry leading tips for securing your first rental property successfully and at the best profit for you.
#1 Get a Written Lease Drafted Before You Purchase
One of the most important things you can do to protect yourself and your investment is to get a rock solid lease drawn up before you make your first rental property purchase. The reason to do this before you buy is that once you’re locked into the buying process and the possible tenant search right after, you won’t have time to work with a lawyer or other legal professional to get a good lease drawn up. You may have to have someone signing the lease shortly after you make your purchase and any delay in that process could cost you valuable rent on that first month. Also, taking your time to draft a solid lease can help you save thousands in possible loss and damages later on if you have to hold a “problematic” tenant to the lease or if they attempt to break it in any way. With a strong lease, everybody wins.
#2 Understand Any Short Term Rental Restrictions
From city to city and sometimes from neighborhood to neighborhood, there are certain restrictions and regulations on short term (under 30 day) rental agreements. If you are buying an investment property for the purpose of turning it into an Airbnb or Vacasa or Innclusive rental property, then you have to make sure you are on the right side of the local zoning laws and HOA regulations first. Make sure that even if the local zoning ordinance says it’s ok that you clear it with the HOA (where applicable) as well because the last thing anyone in the world wants is an angry HOA board on their case.
#3 & #4 Know The Rental Market Before You Buy and Plan Your Margins Accordingly
A huge mistake that a lot of first time rental property buyers make is to sink their money into a property that has all the qualities of a great rental, but is located in an area where people just aren’t renting in. This could have several negative impacts on your ability to keep the property rented with a wide selection of well vetted renters.
First, a slow or non-existent market in your area could mean less competition for rentals, which means that your margins are going to be razor thin, if they even exist at all. You could be losing money each month depending on where you buy your first rental property. Second, if you buy in a slow area, then your property may sit empty for months at a time between tenants which could cost you thousands out of pocket that will take months if not years to get back. Make double sure the rental market is hopping in the area before you buy.
To that end, you should calculate your margins accordingly before you set your rental price because if rentals are in low demand in the area you may not like the margins you’ll be able to fetch.
#5 Be Aware of Higher Property Taxes
Property taxes on rental properties can cause sticker shock in even the most hardened veteran property buyers. Keep in mind that the homeowner’s tax exemption doesn’t apply to rentals and that your property taxes could go up by as much as 300% depending on your area. Make sure that you roll that into your monthly asking price as well so the extra tax doesn’t swallow your margins.
If you’d like the latest and greatest rental property listings for sale, then contact us today and we will help you find the rental property of your dreams.