Landlords are a bit like dentists; folks typically try to avoid them as much as possible. But, it’s the dentist and the investment property owner who have the last laugh, all the way to the bank. For the latter to actually make bank, however, requires careful planning and a tried-and-true system. We’ll try to help you out with both of those.
When you make the decision that you’d like to invest in rental property the next step is to determine what type of property you want. If you’d rather deal with just one tenant then you’ll want to look at single-family homes, townhomes or condos. If you don’t mind dealing with multiple tenants, or hiring someone to do it for you, a multi-unit property, such as a duplex, triplex or apartment building might be for you.
Each has its benefits and drawbacks. While the income for multi-unit properties is typically higher, you will be dealing with multiple tenants (and their multiple problems) which can become a time suck.
Tax laws change, so speak with your accountant to find out just what tax benefits you’ll realize. Basic rental investment property-related tax deductions include:
The life of a landlord is full of pitfalls that many first-time investors aren’t aware of. These include:
That old real estate mantra “location, location, location” matters as much, if not more so, when considering rental property as it does for your personal residence. Tenants initially look at properties in their price range in a preferred location. Then, there are families, who – if they can afford it – prefer to live near the best schools. Your first consideration, then, is to find a property in what tenants consider an attractive location.
If yours will be a vacation rental, think about your ideal tenants and what will appeal to them. Whether they are families or singles, they’ll have their hot buttons, especially when it comes to location and amenities. The tax treatment for vacation rentals is different than for other investment properties so a conversation with your accountant is crucial before deciding on this option.
After you’ve found the right property in the right community, hire a professional home inspector and, if you decide to purchase it, be ready to address the home inspection results to ensure the home is in safe and habitable condition.
Finally, it’s just as important to know when to sell your income property as it is when to buy. When the property costs more money to own than you make from it, sell it. In the meantime, reasonably priced rentals are in short supply, while rents continue rising, so it’s the ideal time to get into the landlord business.
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Chat with Michael!
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