While the thought of newly listed homes increasing to 32.6% might scare you, there might be a hidden benefit behind this. In larger cities, there’s even an increase for home listings to 43%.
You might be asking yourself, how is this a good thing for your future? Well, when you become a rental property owner you can charge more for rental income as well.
If all of this sounds great, you might think to yourself, what’s the process to get started? You’re in luck! Read on to explore the process of becoming a rental property owner in no time!
Why Consider Rental Properties?
First, it’s a great way to have an extra amount of income throughout the year. Many who are looking to retire use it as replacement income. It’s also a great way to save money toward taxes as well.
1. Start Small
First, you’ll need to understand that you’re a business and you need to know about the 3 days notice Florida law. When you’re just starting, consider a smaller multiple-dwelling unit or single-family home so you get used to the landlord process and tenant management.
The best option out of these is a single-family home. Condos can be more challenging since they require monthly association fees and a larger down payment. When you start with a single-family home, you can see what maintenance is required including landscaping.
2. Calculate How Much To Charge
Your landlord checklist needs to include how much to charge. It’s a good idea to check the local market to see how much rental property management companies are charging in your area.
The amount that you charge needs to give you a profit after paying for overhead costs. You need to factor in insurance and property taxes as well.
The best landlords will tell you that it’s important to create a budget for unforeseen maintenance needs. This is because items can break over time. If you’re not sure how much to charge, an accountant can help you figure out the different costs that you’ll want to think about.
3. Buying New Rental Property
Once you’ve found a location that you want to buy, you’ll need to think about how you can stand out from other buyers. Since it’s competitive out there, you’ll want to think about hiring a real estate agent to perform the negotiation process for you.
4. Consider Upgrades
Many will tell you that you’ll want to upgrade your property before renting it out. This is a great way to increase how much you can charge to rent it out.
Keep in mind that you don’t want to spend too much either. If you make too many upgrades then the rent that you’re looking to charge could be too much for others.
Once the property is ready to be rented, it’s time to advertise that it’s available for rent. Once you get the hang of it, you can buy more rental properties in order to make a nice profit.
5. Finding Tenants
When you’re ready to rent it out, you’ll place rental listings in the paper or online. It’s a good idea to have a tenant screening process to make sure that they’re less likely to destroy your property.
Make sure that the leases you send the tenants are compliant with state and local regulations. This is in order to protect your property and yourself.
6. Finance Options
There are 3 types of loans that new rental property owners use. These include commercial investment property loans, conventional loans, and second mortgages on an existing home.
A second mortgage is an option if you have paid off your current mortgage. This means that you can borrow against your current home’s equity in order to buy a new rental property.
While conventional loans are an option, they tend to have higher mortgage rates and you’ll need to have a good credit score and higher down payment. If you’re interested in buying an apartment complex or multiple homes at once, then you’ll need to use commercial investment property loans. A commercial lender will help you apply for this option.
Potential Cons
If you’re not a handy person or don’t have much time, you’ll need to consider hiring a property management company. You’ll also want to work with a real estate attorney in order to help you understand the different legal issues that might occur.
Next, is the potential of having problem tenants and it taking time to kick them out. It’s not an easy process. You’ll need to have legal agreements, advertising for tenants, and take care of utilities.
Buying With VA or FHA Loans
You might be able to buy a multifamily building with VA or FHA loans. This is the case as long as you plan on living in one of the units as well. These loans also work for duplexes.
The great part about FHA loans is that you need a lower down payment and won’t need an amazing credit score. In order to qualify for a VA loan, you’ll need to be a surviving spouse, veteran, or military service member. VA loans are great since you might not need to pay for a down payment.
How To Become a Rental Property Owner
After exploring this guide, you should have a better idea of what to expect when it comes to becoming a rental property owner. Take your time considering your options and if it is right for you as an aspiring landlord.
Would you like to read more informative real estate content? We can help! Check out our other articles today on becoming a landlord, working with tenants, and running rental properties right.
