Rental Income Properties
Anybody that has ever considered purchasing a property with the intent to rent it out to generate income would be advised to do a lot of research before moving ahead with the plan. While it can be a lucrative investment opportunity it is a business and therefore cannot be approached the same way as typical home ownership. The very first question to be answered is can you afford the bank payment if the apartments are not rented? If the ability to make the mortgage payment hinges completely on collecting rents then you are not in a financial position to pursue this.
Selecting Rental Properties
In choosing a property to generate income multi-family units are preferential. If a person could pay a rent amount high enough to make it profitable for you to rent them a home they would probably purchase one themselves. If their credit is not good enough to purchase their own home you probably will have a difficult time collecting the rent consistently.
In addition, a single home if not rented is nothing but an expense. If you own a building with several units in it, then it is likely that at least some of them will be rented all the time to offset expenses and avoid months with no income generated.
Keep Costs Down
A business needs to keep costs to an absolute minimum always. When you are purchasing a home for yourself you may tend to push for higher quality and accept the increase in expenses. If the purpose is to generate income then every possible step must be taken to keep costs as low as possible while ensuring upkeep is adequate to reduce turnover and allow for the highest rental rates the local market will support.
From the initial purchase negation on price forward reducing costs is the first priority. The $100,000 3 unit property may be affordable but an extra $1500 in closing costs is the equivalent of the profit on several months of rents. Finding economical ways to complete the transaction like reduced title transfer fees is only prudent. Click Here for Cheap Conveyancing with In-Deed Online. Ensure any loan used to make the purchase can be paid with less than full tenancy so that your “income property” does not turn into a large monthly expense.
Always require references and a credit checks on perspective tenants. It can take several months to evict a tenant – months that they are not paying rent. In addition, get substantial security deposits- particularly if references are weak. Having to make hundreds of dollars in repairs is not only expensive after a tenant leaves, you cannot rent the unit again until they are made. Even if you are able to recoup the cost of the repairs, you will still lose out on rents while the repairs are being made.