A landlord is only as successful as his property will allow him to be. If you don’t have a good rental property or you overpaid for your property, you’ll have a difficult time finding success as a landlord. Choosing a rental property is the most important decision you’ll make, so you have to be absolutely certain that you’ve put in the research to help you come to the right decision.
When selecting a rental property, there are some questions you need to consider.
• Can I afford the down payment? Many lenders view rental property as a higher risk, and as a result, they often ask for a bigger down payment on the loan. Sometimes, they could ask you to put down as much as 40% on the property. Talk to your lender to determine how much you’ll have to put down, and if you can’t realistically afford it, you’ll need to consider another property to invest in.
• Will the market rental value cover the mortgage? This boils down to simple mathematics and Being a Landlord 101. Your rental rate needs to cover the mortgage. If you’re paying more each month than you’re bringing in, you’re not going to make a profit as a landlord (unless you’re also living on the property). If the rental rate you need is to cover the mortgage isn’t in line with the market value, you shouldn’t make the investment.
• Is the structure suitable for renting out? There are certain codes that structures have to meet before they can be rented out legally. Familiarize yourself with the renting laws in your area, and have the building inspected by a professional to make certain everything is up to code. If it’s not up to code, you have to factor in the costs of improving the structure to get it up to code. This is a very important step, so make sure you don’t skip it.
• Will any repairs or upgrades need to be made? Don’t just look at the price tag on the property as is. You have to also consider any additional money you’ll need to put into the investment for…