Owning a rental property can provide financial freedom with consistent income if approached correctly. Some risks may be associated with owning rental property, so this method of achieving positive income is only for some. It’s essential to go about the rental property process with prior knowledge or assistance from a real estate professional. Three of the most known risks are the property depreciating due to a decrease in the values of homes in a particular area, a severe structural/repair issue, and the property sitting vacant or non-paying tenants. There are specific ways to avoid these issues; read more about the rental property process and the most appropriate way to sell a rental home for the most profit.
Benefits of Owning a Rental Home
Owning a rental property has many associated perks and benefits, including various tax benefits while receiving passive income. Home value usually increases when the property owner has a set mortgage interest rate and purchase price. Homeowners can sit back and gain equity in their property while using any updates and repairs as tax write-offs.
Best Ways to Purchase Rental Properties
There are numerous ways to acquire rental properties, but hiring a licensed real estate agent is the most successful way. These licensed realtors understand the house values, rental values, and market trends that signal house value growth. Using an agent, you trust that these individuals know the warning signs when evaluating a property’s worth. Another method will be to work with a property management company that understands the value and can help maximize the return on investment. However, an agent will still be needed to submit an offer on a home.
Location is Important
The location of your rental property is crucial; when purchasing a rental home, most experienced investors prefer a populated area close to qualified schools, hospitals, shopping, restaurants, and parks. Search for a community with increasing rental prices and a decline in vacancy. An expensive property in a high-valued area only sometimes means the best return on investment, property taxes play a significant factor, and cheaper living areas may have a great return on your monthly profit.
Screen Your Tenants
There’s significant importance involving correctly screening potential tenants; not choosing the most appropriate tenant may cost you time, money, and other resources. Screening tenants should be done similarly to a mortgage lender; some standard requirements will be a credit score of at least 630 with no late payments, excessive debt, and proof of stable employment. It’s highly recommended to collect the first month’s rent, last month’s rent, and a security deposit; this method will eliminate individuals not qualified for the rental. The most prominent warning will be an individual with prior evictions on their rental record.
Maintaining a Rental House
As a landlord, it’s essential to properly maintain your house to satisfy your tenant and to protect your real estate asset. Many landlords hire a property management company to overlook the daily operations of a rental home, including making any necessary house repairs, qualifying the potential tenants, and collecting monthly rent payments. Utilizing a property manager will be your best bet if you live in a different area than your rental property.
Selling a Rental Property
If the time has come when you have decided it’s best to sell your rental property, know that you have multiple options. Two common ways of selling a house; are listing the house with a licensed realtor or selling a house directly to a home investor. A real estate agent usually helps sellers obtain the most for their property, but house repairs and inspections are necessary. Sellers must complete tasks before showing the home to potential buyers; these home repairs can be costly and time-consuming. When utilizing an agent, the seller is responsible for realtor commissions, which comprise six percent of the total sales price. If you need to sell your rental property quickly, utilizing an agent may not be the best route.
When a homeowner sells a rental property to a real estate investor, it eliminates all the stipulations associated with the traditional agent sale, including fees, repairs, and inspections. Home investors purchase the property as-is, with no walkthroughs or home inspections, saving time and money. Property investors provide a straightforward real estate transaction, closing the property within three weeks.
Conclusion: Rental Homes
Owning rental properties is an excellent passive income and investment for those with real estate knowledge or proper guidance by real estate professionals. Rental properties can provide stable income and increase your investment, unlike the old way of holding money in savings accounts for a small interest percentage. Rental homes have tax benefits that include write-offs for repairs and maintenance. Most investors purchase these investment properties with guidance from a licensed real estate agent, and these realtors can access the home’s value and rental rates. Homeowners can use an agent or property manager to oversee operations, including home maintenance and qualifying tenants. If the time comes to sell a rental home, choose the route best suited for your selling needs. Explore the benefits of using a home investor or agent before deciding. The rental property process can be straightforward if approached correctly.