8 Tips for Buying Rental Property
- Be sure your personal finances are in order. Never buy a rental property if you don’t have a healthy emergency fund. Remember that you’ll be responsible for mortgage payments and repairs even if there is no tenant.
- Get preapproved for an investment loan. Sit down with a mortgage lender or broker to find out if you can afford to make an investment before you spend a lot of time searching for a property.
- Research going rents. Ask real estate agents, property managers, or other renters in the area how much you can realistically expect to charge for rent.
- Buy properties in good locations. The quality of the neighborhood is important for keeping good tenants. Take a look at the proximity to employers, schools, parks, and public transportation. If you plan to manage a rental yourself, be sure that it’s fairly close to your home.
- Make purchase offers contingent upon inspections. Always pay to have professional inspections made so you can determine what repairs may be needed and if there’s evidence of pest damage.
- Get ample insurance. You need to have plenty of liability insurance to protect yourself in case someone is hurt while they’re living in or visiting your rental property.
- Know the rules. There are federal and state laws regarding rental property that you must not to violate. Visit nolo.com for information about the landlord-tenant laws.
- Consider the services of a property manager. After years of managing my own rental properties, I turned them over to a professional. Even though a property manager charges around ten to fifteen percent of the gross rent they collect—to me, it’s well worth it. If you want to circumvent all the hassles of managing a property, be sure to add the expense of a professional manager into your calculations before you decide to buy a property.