If you’re ready to start putting your money to work for you and building your investment portfolio, you may be considering purchasing a rental property and making some money off the housing market. But while this might seem like an easy investment idea that will be a sure win for you, there’s actually a lot more that goes into the planning, purchasing, and management of a rental property than you may have realized. So to help you see if this is going to be the right choice for you, here are three tips for buying a rental property.
Know The Rules About Short Term Rentals
While you might think that you can buy any type of housing property and turn it into a rental property, either in the long term or the short term, you should know that there are some rules about short term rentals that you’ll want to follow. According to Roh Habibi and Allison Bethel, a contributor to Fit Small Business, many cities have limits on what properties can be short term rentals, meaning less than 30 days. Additionally, the associations or regulations for the neighborhood or complex that you want to buy in could prohibit you from renting in any form. So before you sign any paperwork for buying a property, make sure you’re positive that you’ll be able to use the property in the way you want.
Steer Clear Of Fixer Uppers At First
To make the most of your investment, you might be tempted to search the market for a fixer- upper that you can get at a steep discount and then renovate so you can charge more for it. However, if this is your first time handling rental properties, Tim Parker, a contributor to Investopedia, actually warns against this practice. Unless you already have a roofing contractor, plumbing services, and electrical contractors that you’re sure can do high-quality work but won’t charge you a fortune, you’re likely to find yourself in over your head on the investment for renovation work, which isn’t a situation you want to be in.
Find A Property With The Right Rating For You
Depending on how much money you have to invest and what amount of risk you’re willing to take on with your rental property investment, the rating of the property you choose to purchase will vary. According to Christine Giordano, a contributor to U.S. News and World Report, areas are often given ratings from A through F based on the neighborhood, which is based on things like violent crime. While getting a property in an A-rated area will be more expensive, you can also often ask for a higher rent. In the lower rated areas, you’ll likely get more property for less money, so it’s all about finding a balance for the right rating for you.
If you’re thinking about buying a rental property, consider using the tips mentioned above to ensure you’re making the right decisions for your portfolio.
