Rental – The Big Words Blog Site

A key focus of my blog is Financial Literacy/Money. Rental property can be powerful investments if they are managed properly and wisely. You’re most likely to thrive as a rental property owner in you have some key knowledge sets in your tool belt. The following guest post is entitled, 7 Things to Know Before Owning Any Rental Property.

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Owning rental property allows you to earn an additional income. However, while many may describe it as passive income, it’s anything but. When you buy a property and own rental property, you’re essentially a landlord. Unless you hire a management company to manage the property and its tenants on your behalf, you’ll be responsible for everything from finding tenants, vetting them, developing and signing lease agreements, and taking care of your tenants’ maintenance needs.

Before owning rental property, there are things you should know. No, it’s not a form of passive income and can quickly become a second job if you’re not careful. Here’s everything you need to know before you purchase your first investment property for rentals:

1. Location Matters

Location is crucial for any real estate investment, whether you’re purchasing a primary residence or rental property. People want to live in places with conveniences like grocery stores, gyms, and shopping centers. They also want to be close to work and activities they enjoy. A home in the city is always more expensive than one in the suburbs because of this reason.

While you can expect to pay a premium for these properties, you can also charge higher rent, but only if it makes sense. For instance, location can determine the rental price, but you must also remain competitive.

2. The 1% Rule

Since this is your first time investing in rental property, you should know what makes a home, apartment complex, or other type of rental a good deal. In general, you should aim to generate at least 1% of the value of the property in rent. Therefore, if you buy a rental property for $200,000, you should make at least $2,000 in rent every single month.

Of course, this is just a guideline. How much you actually charge for rent depends on local market conditions. Keep In mind that competitive markets have lower profit margins because they typically have to accept lower rental rates to stay competitive in an area.

3. Investing Carries Risk

All types of investment carry risk. However, owning rental property is much riskier than owning a primary residence for a few reasons. Firstly, you’ll probably need to take out a loan. You’ll be expected to pay your loan back monthly, even if you don’t have any tenants. The success of your rental business ultimately depends on your ability to find quality tenants and try to retain them, reducing the amount of time units spend vacant.

4. Maintenance

As the rental property owner, you’re responsible for performing any maintenance on the building. Every state has different laws regarding maintenance, so you’ll need to stay up to date on the laws in your area. For instance, in Arizona and warmer states, air conditioning must be in working order, with repairs starting immediately if they break. However, air conditioning and spas are considered a luxury in other states, so you’ll have more time to repair units.

That said, anything you advertise as being part of the unit and anything the unit has when a tenant moves in is your responsibility. While air conditioning might not be a legal requirement, if you initially provided it or advertised that you provide it, you must keep it in good working order.

Luckily, if you’re not a handyman or maintenance worker, you can hire your own maintenance company to handle tenant requests. You can also work with a property management company to handle this and much more on your behalf.

5. Current Agreement

When you purchase a rental, it’s possible that you’re purchasing the property that’s already used for rent. For instance, you might purchase an apartment complex where there are already tenants. If you already have tenants when you take over ownership, you should review their rental agreements and obtain copies of their leases.

Having this information can help you determine whether there’s anything you want to change. You have the right to notify tenants of changes, but we recommend giving them some time to get their ducks in a row when you implement changes. For instance, if you have existing tenants, give them until their lease renewal period to meet your new guidelines.

6. Your Decisions Affect Other

As a landlord, your decisions will affect the quality of life of your tenants. For instance, if you wait to fix someone’s heat, your tenants may not be in a safe environment in the middle of winter. Even minor maintenance requests should be started as soon as possible.

If someone’s washing machine breaks, it’s an inconvenience that can affect their overall quality of life because it means drastically changing their schedule to do laundry. Meanwhile, the rental may be unlivable if they don’t have air conditioning in the middle of summer.

7. Wear and Tear

You can expect damages in rentals the same way you might expect your family to damage your own home. Unfortunately, some tenants show no regard for the property and create massive issues within the home.

For the most part, however, you’ll be dealing with wear and tear. You can’t take money out of a tenant’s security deposit for wear and tear because it’s expected on some level. You’ll need to repair scuff marks, chipped paint, runs in the carpet, and other things that happen just from the daily use of the apartment before a new tenant moves in.

You’ll need to determine whether you can repair something or replace it. For instance, if the carpet has been destroyed by years of people walking on it, you’ll need to replace it with a new tenant. However, if there are scuff marks on the walls, you can clean and repaint them as a quick fix.

Owning Rental Property

Owning rental property comes with a new set of challenges for most people. If you’re considering investing in a rental, we recommend starting small. You can start with a residential home before investing in multiple properties at once. Then, remember you can hire other people to help you manage your business if you can’t dedicate enough time to it.

Ashley Nielsen

Ashley Nielsen earned a B.S. degree in Business Administration Marketing at Point Loma Nazarene University. She is a freelance writer who loves to share knowledge about general business, marketing, lifestyle, wellness, and financial tips. During her free time, she enjoys being outside, staying active, reading a book, or diving deep into her favorite music.

A key focus of my blog is Financial Literacy/Money. An expense all of us have is our housing costs. The majority of us rent at one point or another and there are advantages to doing so, though it’s often thought to be better to buy. The following contributed post is entitled, Why The Rental Market Is So Important.

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https://unsplash.com/photos/b3H9CbDZqrs

We are always taught about the importance of buying our own homes. Once we get a bit older and start to put some money in the bank, everyone wants to know when we are going to get on the property ladder. However, there is another alternative, and this is to rent a property. There are actually a number of different benefits that are associated with the rental market, which is something we are going to explore in more detail below so that you can get a better understanding.

Renting Gives People Flexibility

Whether you are a landlord or a tenant, you cannot deny the fact that the rental market presents much more freedom and flexibility. As a landlord, you are going to have the ability to make money and diversify your income stream. As a tenant, you can stay in the property you are considering for as long as the initial buyer will have you. You are not going to be tied to one specific location as a tenant, so you can explore different opportunities. Plus, contracts are not often overly long.

People Rent What Is Affordable To Them

The rental market has changed considerably over the years. There are so many different options to select from today. This includes everything from studio apartments to large luxury apartments, as well as family homes and cottages. There really is something for everyone. One of the great things about the rental industry that we have today is that it is well-regulated. A prime example of this is the landlord and tenant checks that are carried out before the start of any tenancy. This provides tenants with the best chance of ending up with a landlord that is going to be best for them. If you are not able to afford to rent the property you are interested in, you may want to look at the prospect of getting a guarantor on board to assist with this.

You’re Not Restricted To One Area

Last but not least, when you purchase a property, you are putting down roots in that specific area. You are committed to living in that area and that property for many years to come. There are a lot of people that simply do not like the sound of this. They do not want to have such restrictions placed on their lives. Instead, they like to travel and explore the world around them. They want to be free to take up opportunities when they come their way. This is one of the reasons why the rental market is so important.

So there you have it: an insight into the rental market and why it has become so important. While there are a lot of people that prefer to purchase their own home, there are also plenty of people that like the freedom that comes with being able to rent. There is no right or wrong approach; it is all about figuring out what is going to be right for you.