As home prices retreated from fever-pitch highs, a new breed of real estate investor eclipsed the speculator: the landlord.
More Americans began hanging out “for rent” signs. Some were forced into the business after learning they’d purchased their home for top dollar during the boom and simply couldn’t sell after the market turned and their home was no longer worth what they paid for it. Still others discovered their inner landlord on purpose, often buying investment properties well below prices from a few years and seizing a once in a lifetime opportunity to buy at rock bottom prices!
Rents are rising at a significant pace in many places, in part because the subprime-lending crisis made it harder for people with marginal credit records to secure mortgages, which in turn is increasing rental demand.
Getting into real estate remains relatively easy. Despite the difficulties in the credit market for higher-risk, subprime borrowers, there are lots of financing options available for investment real estate, assuming your credit is good.
Keep in mind that “you’re buying an income stream, not a pretty house”. A house will attract only so much rent. If you overpay, you can raise the rent only so much before your property starts sitting vacant.
The first step is to assemble a small team of pros, especially a real estate agent knowledgeable about local rental rates and other issues that will impact your bottom line. Consider retaining a local property manager (who may just be your real estate agent or his/her company in many cases) who can help you navigate ordinances, set a fair rent, find tenants, arrange lawn services and handle worst-case scenarios, like evictions.
While most Managers tend to charge a month’s rent upfront and about 8-10% of the rent thereafter, if you’re interested in avoiding the headaches associated with managing the property yourself a good property manager is a must.
Property managers are listed in phone books or online. You will want one that has been in the business full time for years. To track rental finances, many landlords use Quicken Rental Property Manager or similar software.
Running a credit check is a must! Landlords can sign up for services from providers such as Fidelity Information Corp. (gofic.com) to get these reports for small fees.
Insist on references from previous landlords. Key questions to ask: Did the tenant pay on time? How much damage was done to the property?
A typical mistake is to underbudget for repairs. Keeping the home in good condition helps attract quality tenants. When you’re a landlord, you’re in the retail business, not real estate. You don’t want to lose your good customers.”
Insurance is another concern. An injury to your tenants or their guests on your property could mean a lawsuit. A good insurance agent and lawyer can help determine how best to structure your business to limit your personal liability.
Where’s My Accountant?
Rental real estate also comes with a dizzying array of tax breaks, deductions and write-offs, perhaps more so than just about any other investment. You have deductions for interest, insurance, repairs, even for the mileage accumulated driving to the bank to deposit the rent checks. It is worth the expense to hire an accountant with rental-income expertise.
Overall, aim for an annual return of at least 8% to 12%. Remember, you can earn 5% in risk-free U.S. Treasury bonds, so you should make more to compensate for the headaches of being a landlord, such as the Christmas Eve phone call informing you of a broken toilet.
If you, or someone you know is considering Buying or Selling an Investment Property in Columbus, Ohio please give us a call and we’d be happy to assist you!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235