Did you know that 2-bedroom rental homes have increased in prices by almost 9% in the past year in the United States?
Investors are making a lot of money with rental homes because the housing market has been so competitive recently.
If you are looking to invest in rental property to increase your income, there are a couple of factors you must consider.
Continue reading to discover what you need to consider before buying a house to rent to families in your area!
Will You Be the Landlord?
One of the first things to consider when buying a house to rent is if you will be the landlord.
Rental homes have landlords that oversee the property. They help the residents with repairs, contract signing, and accepting monthly payments. If you have a part-time job or already rent homes, being a landlord might seem like a good option for you.
Keep in mind that being a landlord can be a full-time job and you must be available at all times of the day. When emergencies arise, you will be responsible for handling them.
Set a Budget
If you want to buy a house to rent, you will need to set a budget for yourself.
Setting a budget will help ensure that you don’t spend more than you want and put yourself into debt. Many people recommend budgeting for 1% of your property’s value to be dedicated to maintenance. Maintenance costs are often overlooked when renting out a property, but you will quickly discover that they will eat up your money.
Your budget should also have a breakdown of how much money you can invest into a piece of property. This will help you determine if financing or buying outright is the best option. Renting a property should be managed like any other business and budgets should always be maintained to help expand and make money.
Think About Home Improvement Projects
Going to purchase a house to rent can be exciting, but don’t be surprised if there are home improvement projects to make.
When buying a home for yourself, damaged areas and spots that need improvement can be done over time. If you want to rent property, however, you need to fix these areas before residents can move in. Try looking for a local handyman and put them under a contract so that you always have help in this area.
Projects will come up frequently, especially when residents move out and someone replaces them. The newer and more maintained that the rental property is, the more money that you can request from your residents.
Is the Home Pet-Friendly?
Another factor that you will need to consider for your rental home is if you allow pets.
Many people have cats and dogs, but they have difficulty finding rentals that allow their pets. Allowing pets will increase your chances of finding a resident, however, it does increase your risks. When pets are allowed, it can cause damage to the homes and you might have to get different insurance coverage.
Many people that rent out property have rules about pets when they are allowed. A great way to address these issues is by adding on a cleaning fee for when the residents move out. That way, you can get rid of the pet dander without covering the costs yourself.
Another way that landlords protect themselves when pets are allowed is by keeping the deposit if there is any damage to the property.
Are You in a Good Location?
Although you might be able to find a cheap home to rent out to individuals, it will be worthless if it isn’t in a good location.
The location of your rental home will play a large factor in how much you request each month for payments and your ability to fill the space. If you want to make the most money off of your rental home, you should look for one that is in a central location or nearby a city. This is because people are willing to pay more money for shorter commutes to work and for having businesses nearby.
If possible, look up how successful other rentals are in the area you are considering. This will give you information about how profitable your home will be and if the area is in demand.
Decide to Buy or Finance
Much like buying a piece of property for yourself, you will have to decide if you want to buy the house or finance it.
By figuring out what to expect with monthly payments from renters, you can decide if financing or paying is the best option. Financing is an excellent option if you are trying to gain capital and don’t have a lot of money to invest in the beginning. If you have budgeted for this over recent years, however, you might be able to save on closing costs by buying the house upfront.
Talk to your financial advisor about what interest rates you should expect whether you buy or finance. This will help you determine which route to take and what will save you the most money.
Renters deal with a variety of scenarios from theft to damage and loss.
You must get insurance coverage for your home to rent so that you can protect yourself and not be responsible for every expense. Take time to explore all of the rental insurance companies in your area to find an affordable option that will cover basic accidents. If you are allowing pets on your property, you might want to look for premium options that will provide you with more coverage.
When renting out a property, you must always do what you can to protect yourself. Many people look for loopholes or ways to get out of paying their monthly dues, which can make your business less profitable.
Are You Buying a House to Rent?
If you are thinking about buying a house to rent to families, there are many things to consider in preparation.
Having a budget will help ensure that you don’t overspend and will also assist in your decision to finance or buy the home. Regardless of your ownership of the home, you will need to buy insurance coverage and think about who will be the landlord for the renters.
Renting homes is a great way to make money, however, it can be time-consuming if you don’t prepare yourself.
Be sure to check out our blog for more articles about the rental real estate market and how you can make money!