Buying a home strictly so you can rent it out is a great way to invest in the real estate market and begin getting a return quickly. While rent varies in each state and even county, the average national cost of rent is still over $900, which is why buying a home for this purpose is so appealing.
In many cases, you can buy a home and have a mortgage that is even less than your future renters will pay, which can put a profit in your pocket even as you pay off the house. Before you buy any house and convert it into a rental, make sure you talk to your realtor about these four things.
A rental does you little good if it’s already a renter’s market. If there are many rental homes listed, then other landlords will be competing with you for tenants, which can not only leave you with a vacant home for longer than you’d like, but can also diminish the amount of rent you can charge because renters have greater options and often choose cheaper homes to live in. Your realtor can show you listings in your area of rental homes and tell you how long homes stay vacant prior to getting tenants in them.
If the market is already saturated with rental properties in your area, ask your realtor about nearby cities and how they compare rent-availability-wise to where you wish to buy a rental. Your realtor can assist you in choosing the best location for a rental home so you have the greatest chance of getting a renter in it quickly.
Average Rental Costs
You want to know what the average landlord charges for a rental, which varies in your area based on how large a home is, what home insurance premiums are for the landlord, and other factors. Have your realtor show you a variety of homes for rent in your area from duplexes to single-family homes to help you decide just what type of property to buy for rental purposes.
You can also access a fair markets report for rental homes by state to give you an idea of what you can expect to charge for the type of home you buy. Ask your realtor about this option.
Basic Home Necessities
When buying a home to use as a rental, you are responsible for providing basic necessities for your tenants. You will want to locate a home that is sold with furnishings or appliances as well as updated heating, electric, and water heating necessities. This reduces your investment costs by allowing you to have a move-in ready home for your future tenants.
Since homes are often sold without major appliances such as a refrigerator or washer and dryer, talk to your realtor about helping you locate the right type of home that needs little upgrading or repairs.
Legal Rental Contracts
As you search for a rental home to buy, keep in mind that you have to also invest in a real estate lawyer to help you draw up a rental agreement for future tenants. Your real estate agent can help you in this area as well by referring you to a specialist who can help you. You will want a real estate lawyer to assist you in obtaining the proper insurance for your rental home as well so all parties are protected.
When you know what to ask a real estate agent about buying a rental home, you can move forward with your investment with greater confidence. Our goal at Jeff Glover & Associates Realtors is to help you find your dream home. Contact our knowledgeable staff for your next home purchase.