Owning a rental home is a great way to supplement or replace your income. However, it is not as simple as posting an ad for an available property and collecting a rent check. There’s a lot of work that goes into it, and many decisions that have to be made before you fill a vacancy. Whether you’re ready now or are planning to take this on post-pandemic, Rocky Mountain Home Inspections offers advice on landing your first investment.
Starting Your Business
Once you’ve set on getting your rental property business up and running, you’ll need to file your Articles of Organization with the Secretary of State for whichever business entity you choose to establish. We recommend an LLC because of the personal protection it offers by separating your personal and business assets. Once your Idaho LLC is established, you can get your EIN from the IRS and open a business bank account. The next step is finding a professional realtor who can help you find good rental properties to purchase and charge competitive rent rates. Hiring a financial advisor who can help you determine how long it will take to turn a profit may also be a good idea if you have no experience with that.
Go where you know
One of the most crucial decisions you have to make is where your rental property will be. If you’re moving out of your current home and turning it into an investment property, there’s really no question. However, if you are planning to buy a property, Interest.com suggests sticking to neighborhoods that you know. This makes sense, because you will be able to describe the property and the surrounding area accurately and, if you live nearby, can keep a close watch on your investment. Once you do find a property in the neighborhood you chose, don't forget to have it inspected before investing to ensure that it's safe to rent out. Rocky Mountain Home Inspections will point out any potential problems with the property to help you make a well-informed decision.
Get a partner
As indicated above, being a landlord is not like running a business, it is running a business. Partner with a property management company to help take some stress off of you, especially if you have multiple units available or live out of town. In addition to providing maintenance on your property, the right property management agency knows the current state requirements that come with being a landlord.
In addition to a property management company, check around to see if there is a landlord association in your area. This will offer you a wealth of information and a support network that you can turn to when you have questions. Most importantly, find an experienced realtor to guide you along the way.
Get your hands dirty
Even in a fast-moving rental market, you don’t want to leave anything to chance. You will attract the greatest number of potential tenants by presenting your property at its very best. This means spending some time inside the home, duplex, or condominium fixing the little annoyances that make it look rundown. This does not mean that you have to dip deeply into your bank account to make the home presentable. DIY Joy’s list of budget-friendly home improvement ideas can get you started.
Coupled with a deep cleaning, a few details, like a faux shiplap wall or a framed bathroom mirror, will make a big impression. Don’t forget the outdoors, as curb appeal sets the tone when you are showing the rental property.
Set the price right
Pricing a rental is where many novice investors struggle. However, it really isn’t that difficult, and there are a few ways you can go about calculating your rental fees. One way is to determine the value of your property and then charge approximately one percent of that number per month. For example, if your house is valued at $175,000, rent it for $1,750.
Another way to determine what you can get is to look at comparable rentals in your area. This will give you a better indication of what the market will bear. SmartAsset cautions, however, that some cities may have rent control laws that cap how much you can charge. It’s a good idea to know what your mortgage will be and your potential ROI before buying a home as an investment property, too. After all, your goal isn’t losing money every month.
Owning rental property takes work, but it is a rewarding way to begin your real estate investment career. The above tips can help you avoid a few pitfalls, but remember, experience is the best teacher, and you will learn something new with each signed lease.