Buying a house with the intention of renting it out can be a great idea. It might bring you a great deal of profit. However, it might also backfire and end up costing you money. Is it worth investing in a rental house, and if so, what is the best way to do so?
If you are not in a comfortable financial position, you should not be considering purchasing another house. If you are in a lot of debt, adding a mortgage on top of your loans can be overwhelming. If you do not collect rent, or you have to make a big repair, you will not be receiving money from the house. On top of this, you will still have to make all your other loan payments, which can be very financially straining.
With a rental house, the possibility of damages is going to be much higher. This tends to be because tenants might not take care of something as well, because it isn’t theirs. Being a landlord is more achievable if you are handy with your tools. Being able to make frequent repairs is necessary, and it will avoid having you call someone in to fix the problem. This will save you lots of money in the long term.
Choose Tenants Carefully
The best way to rent is by being an observant landlord. This starts at the very beginning of the process when you are selecting your tenants. Go through the rental applications carefully and follow up with references. Once you have a good tenant, be careful not to lose them, as they are rare and far between. As a token of appreciation, you might consider giving a good tenant a rent-controlled home. This may cost you a bit of money if you don’t raise the rent but having a good tenant in your house is totally worth it.
Find the right location
When looking for an investment property, you should not just jump on the first one that is available simply because it is affordable. Take some time and research popular areas. Ideally, you will purchase a house that is in an up and coming part of town. This will allow your tenants to be near more amenities, which means that you can charge more for the rent. Good things to keep in mind is proximity to schools, parks, shops, and restaurants. This will give you more selection in your tenant applications as well, as more people will want to live in a place like that.
Consider if you need the extra income
Having rental income is great because it is separate from all your other revenues. It is not tied up in your stock market investments, or pension funds. Not having all of your eggs in one basket is the best way to prepare for future financial goals. Having rental income may even allow you to retire early, if you do not need your salary to sustain yourself anymore.
If you already have the house and are needing to sell a rental house, then there are additional steps to consider and one that has costs.