Things to Consider when Buying a Rental Property

Things to Consider when Buying a Rental Property

If you are considering buying a rental property, keep in mind that there is a lot more to the cost than the initial price. While you are earning money thanks to the tenants, you are also going to have plenty of expenses as well. So, here are a few things to consider when purchasing a rental property.

Getting the Right Financing

The goal is that you should be earning considerably more than you are paying in terms of financing the property. You should expect to put down at least 20% and preferably 30% to secure a mortgage. The more units that are a part of the rental property, the greater your down payment will be. Also, you will need a good credit score of at least 720 to ensure that lenders will accept you. Another requirement is that the funds needed for closing must be in your banking account for at least 60 days.

Getting an Attorney

The right attorney can make all the difference when closing on the sale. They often will save you the deal thanks to their skills in looking over the requirements. A proper attorney will go over the details, smooth out any issues, and inform you of what is expected so that you are properly prepared. Be sure that they have a good paralegal that can be reached at any time. Keep in mind that your attorney will also review the lease agreements for tenants so that it is tight and proper.

How to Manage the Property

It’s amazing how many people rush to purchase a rental property without fully understanding how they will manage it. There are basically three ways to manage a property;

• Manage it Yourself
• Hire a Property Manager
• Hire a Property Management Company

There are positives and negatives to each approach and your choice will depend in large part on the money you have available to hire a manager or company as well as the time you can manage the property yourself. However, you should work out the details first before you make the purchase, otherwise you risk spending more time or money than you had planned with the property.

Maintaining the Property

You will also need to line up how you plan to properly maintain the property so that it retains its value. You can choose someone who is colloquially known as “handyman” or general maintenance technician who is good with small repairs and upgrades. You will also need to have pest control and landscaping services. The sooner you can arrange for these services, the better position you will be when buying a rental property.

Insured

Your property will need to be properly insured in case the worst should occur. The trick is striking the right balance of having the proper coverage at a monthly premium that is as low as possible. An insurance agent becomes invaluable if you have multiple properties because they can find the best insurance at the lowest rates for them all. Plus, the agent will do the work of finding what is right for your needs.