Real estate is one way to make a steady income. You can make money either through buying houses and flipping them or buying houses and putting them up for rent. However, there is more to making money through real estate. You should arm yourself with important information before investing in your first rental property. If you are looking to invest in your first rental income property, here are some things you should look out for.
The State of the House
Before you invest in your first rental income, be certain about how much money and time will go into renovations and fixers. While there is nothing wrong with buying a fixer-upper, you need to be fully aware of what you are getting into. If you do not have the time and resources to make major repairs, do not get a house that requires such repairs.
Get a qualified professional to carry out a thorough inspection of the house. Make a list of all the repairs needed. Divide them into two categories; those you can handle on your own, and those you can outsource. Get an estimate of how much the repairs and fixes will cost. Figure out how long it will take to make the repairs. Figure out if this is a commitment you are willing to make.
The Taxes on the Property
Taxes are an important thing to consider before investing in a rental income property. The taxes on a property determine how much you will earn from the property.
If the taxes are high, you will make fewer profits. If the taxes are low, you will get to keep more of the income from the property. This makes getting a place with lower taxes a wiser decision than getting a place with higher taxes even if it is in a prime location like a metropolitan area.
How Much the Insurance Costs
Apart from the taxes on a property, insurance costs can also determine how much of the profit you will make from the property. As such, you must consider it.
For a start, you need to figure out the kind of insurance coverage you want for the rental property. Would you opt for a lower premium every month with a higher deductible when you make your insurance claim?
The next step is to figure out if the area the property is in has higher premiums because of sinkholes, flooding or natural disasters. You should not go for a property like this as it would mean you getting less profit for the property.
Be sure to compare insurance rates before settling for a rental property.
The Location of the Property
Where the property is is very important when it comes to investing in a rental income property. It determines if you will have tenants willing to pay the amount you set for the house. It has to be in a place people would want to live in.
One of the first things to consider is how safe the area is. Ensure that the crime rate in the area is low.
The next thing to consider is the aesthetics of the area. People prefer nice areas with neat lawns.
Also, take into consideration the type of tenants you would prefer. If you intend to rent the property to families, getting a property in a location with great schools and amenities is a good choice. If you intend to rent to college students, buying a rental property close to a university is a wise investment decision.
A rental income property will make money for you. It will also cost you money. As such, before investing in your first rental income property, you should take into consideration miscellaneous and unexpected expenses.
After taking the costs of renovations and major fixes like the roof and plumbing into consideration, you should set aside some extra money for miscellaneous and unexpected expenses. This extra money will serve as a cushion for unexpected situations like when the house sits vacant for a while.
Investing in a rental income property is a wise decision. Just remember to do your necessary research and arm yourself with the right information on the property before buying it. Making informed buys guarantees maximum profit.