What You Should Know Before Investing in Rental Properties

With home prices at an all time low coupled with low rates, right now could be an ideal time to invest in rental property. However, like any investment, you need to understand what you are getting into before you buy.

Here are a few tips to help you decide if investing in rental property makes sense:

Research the local rental market – Determine how much rent is reasonable to expect given the location and quality of the property. Also, find out which areas are exhibiting steady growth with increasing property values.

Consider your ideal tenants, location & property type – Will you primarily rent to Students? Young couples with children? Singles? In general, areas with a lot of renters as well as highly populated areas are ideal. If you want to rent to students, consider investing in a property near the university. If your focus is young couples with children, a safe neighborhood in a good school district is important. For singles, being close to public transit, shopping and cultural attractions is key. The more amenities your property has, the more it will attract renters, as well as potential buyers if you decide to sell later.

Which type of property makes the most sense? Single family homes, a duplex, or multi-family units? Keep in mind that the type of property will determine your level of need for a property manager, which can impact your overall rental income.

Calculate your expenses – In general, your expenses can be divided into two categories: fixed and variable. Fixed expenses include annual property taxes, insurance, routine maintenance and repair, as well as the cost of property management or maintenance services providers, if needed. Variable expenses include major repairs such as replacing the furnace or plumbing emergencies, as well as mortgage payments to cover unexpected periods of vacancy. Most experts recommended that you have six months of mortgage payments saved so you are adequately protected.

Note potential risks - You could incur legal expenses in the event you need to evict a tenant, or excess repair costs should a renter damage the property. You may want to look into landlord/tenant cases at the local county courthouse to get a sense of the kind of challenges landlords face.

Different from the purchase of your primary residence, where emotions play a key part in decision making, keep in mind what makes the most sense when it comes to purchasing rental properties. With the proper knowledge, preparation, and the backing of a supportive network, you are sure to make a smart investment decision.

About the Brokerage

Founded in 1976, Wright Kingdom Real Estate has become the largest independent company serving the Boulder real estate market by delivering old-fashioned service combined with the latest technology. Partner affiliates have allowed the company to gain both national and international appeal, while repeat business and referrals supply over 80 percent of WKRE’s total business. With the ability to exceed customer expectations, Wright Kingdom has become the local expert when it comes to buying or selling homes in Colorado.

For more information on Wright Kingdom Real Estate, visit them online at www.wkre.com.