Rental properties can be profitable but before buying a new one, landlords need to think about these three things.
- What can you afford?
Buying a rental property costs money. The cost depends on things like the location and condition of the property, whether you’re paying with cash or a loan, how much you’ll pay in taxes and fees when you buy it and how much you’ll pay for maintenance and repairs. You should save enough money to pay for these things without borrowing too much or giving up other needs.
You must have a real budget and know where you will get your financing. If you plan on paying cash, you will still need to determine how much cash you can afford to spend on a rental property. The amount of money you will need to put down depends on whether it is a single or multifamily and the different programs offered by the lenders. You need to shop around to determine the best and the lowest cost loan available to you. Other than the cost to finance your loan, you will also need to factor in your closing costs. Consult a realtor as early as possible.
2. Where should you buy?
Location is very important because a great location can attract better tenants, provide higher income and likely allow for faster appreciation of the property. Tenants like to live in neighborhoods that have good schools and are near to work, adequate shopping and entertainment. They also want to live in an area that is considered safe. Conducting thorough research will help guide your decision.
3. How will you manage your property?
You should consider how you plan on managing your property. Despite the best purchase price and location, if your property is not well managed, you can have a negative return on your investment. Do you have the time and resources to handle a tenant and take care of all the maintenance required for a property? Are you comfortable dealing with the Arizona Landlord and Tenant Act? Are you capable of pricing your property and marketing it effectively? If you answer no to any of these questions, then you should speak to a property manager before purchasing your rental property.
If you need help getting direction on purchasing your new rental property, please reach out to the Crest Premier Property Management Team at: