Member Insights by Core Developments
Property can be a great investment when you make the right choices, but there’s a lot to think about before you consider purchasing a residential or commercial rental property. Safety is a big concern and comes in many different forms. The safety of your property and tenants is paramount, but so is the financial security of your investment.
Whether you buy a property that needs work or one that has been recently renovated, it’s important to check if anything needs to be updated and if existing updates were completed to the proper standards. Electrical and plumbing inspections are vital to the safety of your tenants and investment. You want this property to be a return on investment, not a money pit where you’re constantly fixing things. Tenants don’t want a run-down rental that you promise to fix later. Updating a property before you begin renting is critical for safety and a better ROI.
Costs vs Income
Investing is always a risk, but when you make a well thought out and financially practical decision, you will almost certainly see a return on your investment. This means budgeting practically for the real costs of property ownership. Rent that only covers the mortgage payment will not earn you money. You need to consider the cost of insurance, taxes, and maintenance and upkeep. If you plan on being your own handyman, remember, that’s time out of your busy schedule you need to devote to your investment property. Make sure what you can charge for rent keeps you financially secure for long-term gain.
Short vs Long-Term Rental
The rise in consumer-owned vacation rentals like Airbnb has changed the way people look at residential investment properties. However, laws and regulations may have a say in who you can rent to and how. Check zoning laws and the policies of any short-term rental sites you may list on to see if you meet the requirements for short-term rental. Remember, having guests constantly come and go will increase your security risks, while long-term tenants will treat your investment property with more care and responsibility. Long-term rentals also offer more financial security with regular income as opposed to the ebbs and flows of short-term rentals.
Properly vetting tenants is an important step in renting your investment property. You will need to run a criminal record and credit check, verify income and employment status, and investigate their previous renting history. A good candidate will have a history of on-time payments. If the property you want to buy comes with tenants already attached, get info from the current landlord and meet with the tenants to ensure they understand your intentions and you understand their expectations and terms of their current lease.
You can’t talk about investment properties without talking about location. Not only do you have to pick out the hottest part of town, but you also need to think of safety. Drive by the property several times (morning, weekends, etc.) to see what car and foot traffic is like in the neighborhood. Don’t be afraid to knock on neighbors’ doors and ask them what they think of the area. Tenants like being close to important safety amenities such as fire stations, police stations, and hospitals.
Work with the Pros
One of the best ways to keep your property, tenants, and investment safe is to consult with other people who own investment properties. Talk to real estate agents to learn about the best parts of town or where the market is growing most. Ask about the most common problems encountered with investment properties and what to look for when you are physically inspecting the property. Learn from the advice and mistakes of others.
Investing in a rental property can be a great decision, but like any investment, there are many risks to be considered. Keep the safety of your tenants, your building, and your long-term investment in mind when choosing your first investment property.