Consider these keys before becoming a landlord

Do you have big dreams of owning rental properties and reaping the rewards of owning and operating residual income potential? While owning and managing rental property isn’t always easy, it can be a great investment with lifelong benefits. If you currently have the cash flow, or can find a willing investor, your desire can be met with plenty of homes, condos and complexes to purchase and rent out. The main key to success is spotting a rental winner from a dud. Let’s discuss the top things you need to know before you jump on a rental property.

Great bones & fast money

Great bones is one of the major aspects to look for in a rental property. Minimal maintenance and preferably only cosmetic repairs to be done when you take ownership is a primary goal. You should seek out properties that can make immediate money, without a laundry list of upfront repairs and renovations before a tenant can begin living in the home. You want to focus on having as little downtime as possible before you can start collecting rental income.

If the property has current tenants, study their past track record closely and keep a keen

eye out for delinquent payments.

2 percent rule for rent

Compare the other rentals in the area, find the average monthly rent and determine if the local rental units meet the 2 percent rule. As a popular rule of thumb, many investors set the monthly rent at 2 percent of the total purchase price of the home. Also, if other landlords are offering incentives such as “First month free” or lowered security deposits, this could be a sign that the market is too flooded and you should consider other areas.

Location, location, location

Location is not only vital for rental traffic, but you

should also consider your resell options in the future. Choosing a less expensive home in a struggling neighborhood isn’t necessarily going to be more profitable than a slightly higher priced property in a more popular neighborhood. Look for signs of a great neighborhood, such as popular chain restaurants and shops like Starbucks, Trader Joes, Whole Foods, etc in the surrounding area. It’s been proven over and over that property prices go up in homes near these popular franchises and you reap the benefits by jumping into these areas.

Do your research

There are many costs associated with buying rental property such as closing costs, loan fees, down payments and much more. These fees may come as no surprise, but you need to get a feel for the additional costs of being a landlord

so you can decide if is the right fit for you.

Maintenance: Assume that 10 to 20 percent of your rents received will go to maintenance.

Make sure you know the taxes due on your rental property.

Insurance: If you choose to have a loan on your rental, you will need to have homeowners insurance.

Turnover: Assume 10 percent of the rental fee to account for possible tenant turnover.

Keep your eyes open for your next investment and have your realtor on standby when you find one that works for you!