Thinking about Investing in a Rental Property? Here are a Few Things You Should Know: Rental Properties for Beginners
Rental properties are among the oldest kinds of investments and is a practice basically as old as land ownership itself. Essentially what happens is someone will purchase a property and then rent it out to a tenant. The owner at that point is the landlord and is responsible for not only paying the mortgage, but also any additional costs that are associated with maintaining the property, and any associated taxes. In an ideal situation, the landlord will be able to rent the property out for enough money to cover all of these costs, as well as a monthly profit.
However, the ideal is not always the reality, and many landlords have come to realize that sometimes in order to ensure that you get not only a tenant but a good one, you have to adjust your price accordingly, only charging enough to cover the monthly mortgage and upkeep of the house. Generally, properly maintained properties appreciate over time, meaning that the landlord ends up with an investment that continues to grow in value.
Possible Pitfalls of Investment Properties
Lack of Tenants
When deciding to purchase a rental property it is important that you make sure you are buying it in a viable market. This means doing your research, and making sure that you are not purchasing in an area that has a lot of vacant properties, an area that is close to amenities, and also offers opportunities for education, recreation and of course employment.
Not Finding the Right Tenants
Unfortunately, just because you are able to fill your property with a tenant does not necessarily mean that you are in the clear. It seems that for every story you will hear about a good tenant, the tenant that always pays their rent on time, doesn’t throw wild parties, doesn’t let other people live there for free, or take in herds of stray cats – there are three stories about tenants that did, in fact, do those very things. Having a bad tenant can be extremely stressful, and can end up costing you a lot of money in repairs, bylaw infractions, and potentially loss of rent if they end up leaving without notice. Luckily there are a number of things that you, as the landlord can do in order to protect yourself and find the best tenants possible.
- Credit Checks
The best way to find out if you are dealing with a reliable person is to find out what their history is in terms of paying their bills both in completion and on time. This will help you sort the actual contenders, from the rest. - Get Landlord Insurance
Landlord insurance will protect your wallet from having to deal with the cost of damages, delinquent tenants, storms, theft and more. - Call References
If a potential tenant is unable to provide you with at least two reliable references be it personal, professional, or former landlords, you should be concerned. Make sure that you specify what kind of references you are looking for (if you have a preference) and follow through on calling them. This could save you a lot of stress and money in the long run.