Considerations for owning rental property
It’s no secret that the trend of flipping houses has been on the rise thanks to homeimprovement shows on HGTV. Once complete, owners have the option to either sell the home for an increased profit or rent it out.
In fact, investment-home sales increased for the first time in five years, up 7 percent, according to research released in 2016 by National Association of Realtors.
Owning rental property comes with many advantages, including steady income each month and long-term wealth the longer the home is owned. The process can be fun while also serving as a great learning experience.
However, there are also several considerations to think about when deciding if the investment is right for you.
First, you’ll need to find the right location and audience. Depending on the area, it could be easy to find renters or it may be a struggle.
A prime location could be next to a university or other urban location.
If a home is located in a rural area of town, renters may stick around longer than the usual college student on a year-to-year basis. A local Realtor can help by providing you with information on school districts, income levels and other renters in the area to help make the right purchase.
Another major consideration is maintenance. As landlord, you often are tasked with handyman duties. Having a busy schedule often can make these day-to-day tasks daunting. Hiring a property manager to take care of these duties may be a wise investment.
When preparing to make a purchase, you’ll want to do research to protect your investment and consider the timeline. Build into the investment timeline considerations such as time finding renters and any improvements needed. Also, consider background searches of applicants, know the rights and responsibilities of both tenant and landlord, and consider insurance on the property, including urging tenants to consider renters insurance.
Lastly, think of the little things. Is the rental property close to your home? Sixty-two percent of investment-home buyers purchased a property within 22 miles of their primary residence, according to NAR. Is there ample parking for multiple guests? Will the bills be high due to inefficiencies?
Overall, owning a second home for investment purposes is a great opportunity. To ensure you find the property and think of all potential risks, work with a local Realtor to help guide you through the process. Their local experience will be invaluable to making the most of your new venture.
Pete Galbraith is president of the Oklahoma Association of Realtors and president of Coldwell Banker Select in Tulsa and Oklahoma City.