Owning a rental property might be a good idea for some while it might not be so for others. This is due to individual differences. The personality, strengths and weaknesses of the individual come into play. This article will consider the factors you should consider before making a decision to own a rental property.
- 1 1. Personal Financial Strength
- 2 2. Handling Maintenance Issues
- 3 3. Handling Tenants
- 4 4. Opportunity Costs
- 5 The Advantages Of Owning A Rental Property.
- 6 1. Passive Income Source
- 7 2. Income Increase From Property Value Growth.
- 8 3. Increase In Property Value From Upgrades.
- 9 What To Look For When Investing In A Rental Property.
- 10 1. Location Of The Property.
- 11 2. Transportation
- 12 3. Parking space.
- 13 4. Available Utilities
1. Personal Financial StrengthDo you have enough funds to finance the processes involved in owning a property? If you are obtaining a mortgage on a non-owner occupied property, you will be required to make a larger down payment. You also have to fulfill necessary requirements as though you are getting a personal loan. You must show that the property is viable and that you will get enough rent from occupancy. Apart from mortgage payments, you need to have reserve money for repairs, upgrades and renovations.
2. Handling Maintenance IssuesWill you be able to handle maintenance issues when they arise? This is a huge responsibility which you have to consider.
3. Handling TenantsWill be able to deal with tenants and collect rents and meet their needs? Your tenants will have different personalities. Some tenants may not pay their rents on time and some may cause more property wear than others. Will you be able to cope with the different personalities and their way of doing things?
4. Opportunity CostsHow will owning a rental property compare with other investment opportunities for you? Would it be more profitable for you to invest in a rental property than in another venture? You need to compare this before taking the leap.
Though there are many risks involved in owning a rental property, it has its advantages.
The Advantages Of Owning A Rental Property.Owning rental property has its advantages. You can make a lot of money from it if all goes well. Let’s look at these advantages.
1. Passive Income SourceThe major advantage of owning a rental property is that it will provide with a steady income from renters. The rent they pay every month will put a lot of money into your account. For instance, if you rent out a house for $2,000 and the house is fully occupied, you will get $24,000 every year. Nothing beats this kind of income stream.
Though you may not get up to the amount in the example, you can still get good amounts from your rental property even with half occupancy. It is recurring income that you can maintain with relatively little effort. It is a good option if you are looking to make some money on the side or as additional financial security when you retire.
2. Income Increase From Property Value Growth.The value of properties increases over time because of the nature of demand. You gain from the increase in the value of your property over time. This depends on where your property is located. The value may increase significantly over a few years in some locations while it may remain the same in other locations.
The value is also affected by inflation. If your property is in an area with high demand, you might be able to beat inflation but if it is in a stagnant location, you may not be able to keep up with inflation.
3. Increase In Property Value From Upgrades.The upgrades you make to your property will increase its value without significant cost. Repainting the home, doing some landscaping and performing repairs, can add more value to the property. These things usually do not cost much but the value it adds is huge. This allows you get more from the property. You can increase the tenants’ monthly rent and also sell the home at a high price in the future.
If you are into home improvement, this should be your motivation for purchasing a rental property. You will be able to fix the home when you acquire it and also do some upgrades while tenants are in it. This will bring in more money for you.
What To Look For When Investing In A Rental Property.If you are considering investing in rental property, there are features that will make your property stand out and attract tenants. These attributes will make more people to want to rent your property. Some of them are discussed below.
1. Location Of The Property.The quality of tenant you get is dependent on the location of your property. This directly impacts your revenue. Tenants will be willing to pay more if your property is located in a great location. They prefer houses in neighborhoods with good security and quality schools. They want their home to be close to grocery stores, and their offices as no one like driving for hours to get to work every day. You can use a real estate agent to help you find neighborhoods with the qualities that tenants like.
2. TransportationIf you own a property close to public transport and major highways, you will be able to rent it out easily as it will attract many tenants. People do not stay at home all day, they go to work, the grocery or wherever they spend most of their day, so they like to rent a home where they can easily have access to transportation.
3. Parking space.Tenants are attracted to properties that have a parking garage nearby. If your property has parking space or is close to a parking garage, you will attract a high quality of tenants. In some neighborhood, it is mandatory for you to provide parking space for tenants.
4. Available UtilitiesTenants prefer buildings with utilities attached utilities especially if the building has separate units. They like each unit to have separate utilities. This is also good for you as you will be able to charge a good sum for the comfort this feature provides.
As stated earlier, owning a rental property is a great idea but you have to decide whether it is good for you. The points discussed in this article will help your make an informed decision.