Buying a Rental Property

Rental properties are appealing because they offer an investment with a tangible product attached: i.e. a house or building. Unlike stocks, investment properties will not miraculously plummet one morning while you're drinking coffee and watching the Nasdaq. However, owning rental property is not for everyone. It may seem like a solid move picking up the duplex down the street, but when your new renter is knocking on your day at 3 am because their basement is flooded, you may second guess your original enthusiasm over a new rental property. Not to deter you from buying rental property because this article is actually in support of putting your money behind real estate, in part because investment properties can be had for a fraction of their costs from just a couple of years ago and the market is currently flooded with people looking to rent.

So how do you prepare yourself for life as a landlord?

First figure out what your expectations are and then forget them. Rental property is not all positive cash flow all of the time. Some months you will have to make major or minor repairs and your rental income might go right back into mending a fence or repairing a leaky roof. Regardless, your renters (if you've found a solid deal) should be covering the cost of your mortgage so you're purchasing a piece of property without paying for it and hopefully making some extra money as well.

But I'm getting ahead of myself here. The first thing you need to do is start looking for the deals. Consider more than price here (though that's important too). You need to take into account the location, the nearby amenities, the rental population in the area and the features of the rental. Are you looking at a 4-Unit apartment building with only one parking space in a town where everyone drives? This might not be the best deal. Is the rental home perfect except it's located next to a water treatment plant? The devil is in the details with any real estate investment because you're banking on someone else choosing to live and pay for the apartment or house. If it's not a desirable place to live, the amount of rent that you can charge will probably dive and you may find yourself paying out of pocket to cover your monthly expenses.

You should also consider your capabilities as a handy-man. If you can't fix even basic problems, you may want to consider a property management company that covers repairs, takes care of rental applications and collects a fee for their services. Again this depends on how much rental income you're collecting each month because the point of your purchase is investment, not expense. Management companies also deal with renters, which can save you a lot of time and energy.

Once you start hunting for a great investment, find a good Realtor that specializes in rental properties so that you have access to investment homes and buildings as soon as they hit the market. In real estate, good deals go fast. You should also spend some time figuring out what kind of financing is available or if you have the option of paying cash. Start by pulling your credit report and considering how much you can put up as a down payment.

Rental properties located near Universities and cities are often ideal options because you always have a large pool of potential renters. Avoid rural spaces or properties located far away from major amenities like grocery stores, bus lines and schools.

If you're looking for a rental property in East Lansing or the Greater Lansing areas, please contact me at MyRealtorRob. Investment properties are popular right now; in fact, I just listed four in Mason over the previous week. I also specialize in East Lansing rental properties and I'm more than happy to answer all of your real estate related questions.