At the moment, owning rental property in many markets can be a great investment. The tax code for now anyway favors rental property. The ability to depreciate the property over time actually creates a write off against income to help cut tax liability. In choosing a house, or condo to purchase as a rental property always think it terms of, "could I live in this property". Floor plans matter. It's best that the property have at least 2 - 4 bedrooms and 2 - 3 bathrooms. Buy in areas with good schools because that tends to be key to appreciation.
As always in real estate always consider location, location, location. There are no bargains in real estate so choose wisely. Renters prefer one story homes over two story homes; but both are workable. If you can afford a single family home rather than a condo that is best because it will always appreciate more over the long run. But if you can only afford a condo, it is ok to start there.
You must be very selective in choosing your tenants. Use a thorough rental application that you can find on the Internet. It will scare away dead beats. Run a credit report. Check references and verify job information. It is very important that your rent to someone who first of all can pay the rent and is responsible and will care for your property. You can obtain a standard lease for your state on the Internet. You must include rules in your lease as an addendum. Require first month and last month rent and at least a month security deposit. A tenant that cannot come up with three month's rents is not a good bet. Be careful about allowing animals. If you do allow a pet, keep it small and add $1,000 to the security deposit. Animals can be very destructive and the smell permeates a property so be advised it is best to avoid them if possible.
You will need to determine if the monthly rent will cover expenses, which could include mortgage, insurance, property taxes, maintenance, homeowners association and other expenses that are common. If not the rent won't cover expenses, how will you cover the short fall. Naturally if you have positive cash flow that would be best; but you will be able to write off any short fall so in essence the government helps pay for the property. Think of a tenant as working for you because as the tenant is paying off the rental home, you are building equity in the property. Owning a rental home is a long term investment. It another good way to plan for retirement.
If you need help acquiring a rental home and or for property management, just contact Paragon Home Resources. We can advise you concerning your best options.
