The dollar amount may sound like a great deal, but what is the overall condition of the property. Cosmetic fixes can be taken care of over time. Habitability issues need to be dealt with immediately. Be sure to have a home inspection prior to purchasing a property to verify those tiny little details. Those unexpected expenses can turn in to a bigger problem or even legal issues.
When looking at a rental property, it is important to understand what you are agreeing to. Are there current tenants in the property? In many instances, you may be bound by the terms of the current rental agreement. Here are a few questions you may want to ask.
- What is the monthly rent?
- Are they ‘good’ tenants?
- Have there been any problems?
- Do they pay their rent on time?
- What utilities are included?
- What is the term of their lease?
What is the economic outlook for the area you are looking in? Over the past year, or even past 5 years, what has happened to the property values? Are there other rentals in the area? Be sure to find out about the laws concerning rentals in the area. There is nothing worse than purchasing a home to rent out only to find that you need a rental dwelling license or that rentals are not allowed.
Talking with an experienced property manager can help to clear up a lot of things. Someone who specializes in the area will be able to help you figure out the potential for growth.
- Insurance: Remember, a simple homeowners’ insurance policy may not suffice. Be sure to talk to your insurance company about specific insurance you will need as well as any exclusions or requirements you may need to abide by.
- Maintenance: When you are not residing on a property it is easy to overlook or forget about regular maintenance. There may be requirements with the city that may require you to front the bill if your tenants fail to care for the property (landscaping)
- Vacancy: It is always the primary goal of any rental property to have zero vacancies, but sadly, vacancies happen. Do you have a contingency plan if you have a turnover?
If you have questions, be sure to ask. An experienced and licensed real estate agent and property manager should be able to help with any questions you have.