Is Buying a Rental Property the Right Choice for You?
If you asked most people who don’t own rental property if they’d consider buying one, many would say absolutely! The thought of ‘sitting’ on a property while someone else pays down your mortgage is of course very appealing. Ask the same question to someone whose owned rental property and at least half of them would say, “No thank you” or “Never again!”.
Owning rental property appears easy until you do it. Being a landlord doesn’t mean you ‘sit’ on a property and wait, it means you own a second job. There’s more to it than just finding a tenant. You need a tenant who’s responsible enough to pay monthly rent and preferably one who wants to take good care of the property. You need to be available for inspections, walkthroughs, routine fixes (which rarely happen at convenient times), costly upgrades like fencing, shingles, flooring etc. You need to sort tenant inquiries, show the property, deal with vacancies, contracts and more.
If you rent to the wrong tenant, you could have even bigger challenges to deal with such as non-payment, damages to the property, eviction notices and even worse, court.
Even so, if you’re willing to deal with the risk and take on a second job for little to no pay for the upcoming one to two decades (no joke), it’s quite incredible how well rental property can ‘pay off’ in long term.
So, how do you know if it’s the right choice for you?
- Do you have a down payment saved? Most lenders require at least a 20% down payment. If these funds or more are already available, that’s a great start.
- Will you have an emergency fund set aside? An emergency fund is a necessity to maintain financial peace. These funds help when unexpected repairs or maintenance come up such as needing a plumber or duct cleaning. You also want it for major items like furnace or appliance replacement. Most leases are one year and should your tenant decide to move you want to be prepared to cover 1-2 months’ vacancy as well. A healthy start to an emergency fund is 3 months’ worth of expenses.
- Are you good at repairs? If not, do you know people who are who could be available within a 24-28hr period when (not if) a need comes up?
- Are you intuitive with people? Do you have a good judge of character? There are ‘professional’ tenants who are really good at telling you what you want to hear. They have all the right answers, however they’re not a true representation of their character. You need to determine who the right person is to care for your property and pay the bills.
- Are you prepared to deliver eviction notices if needed? This is the hardest part of being a landlord. You want to be understanding and patient for people’s situation, however sometimes tenants can take advantage if or when you become lenient. Sometimes this means making a tough call if you feel you’re being taken advantage of.
- Are you prepared to be honest and work hard for your tenant? There are as many poor landlords as there are poor tenants, and as many good landlords as there are good tenants. As a landlord, you are just as responsible for the upkeep of the property as they are. Do your part, take care of them, be respectful and you are more likely to receive the same in return!
If you answered YES to the reasons above, then buying a rental property may very well be the right choice for you. Join us again next week as we share more about this topic. If you’d like more information about buying an investment property, give us a call! We’re happy to answer any questions you have. And if you’re considering selling your home, it’d be our pleasure to meet with you, get an understanding of your goals and see how we can help.
Jason Rustand with RE/MAX Real Estate serves with the highest level of integrity and excellence every time. For more info contact Jason direct at 780.919-0004, email firstname.lastname@example.org or visit WeSellLeduc.com