Buying a single family home is an important decision, but buying a home with the intent to turn it into a rental property can be a larger responsibility. As a landlord and property owner, you are responsible for the property and also for keeping it rented with responsible tenants to pay for the property costs. To help you in this decision, here are some property ownership and landlord tips to make the responsibility and process easier.
Calculate a Rental Rate
One of the goals when you own a rental property is to be able to at least break even or have a positive cash flow on your rental property, so you need to determine its correct rental rate. A property that does not collect enough rent to even cover the mortgage payment is not a property you want to invest in. The rent you collect should cover the mortgage and all other expenses the property has so you can put any extra toward upgrades to the property, paying yourself for your time and work, and cash to put into buying another rental property.
So to make sure you buy a property that has a positive cash flow, you need to find out how much you can rent it for and make sure it will cover the property's costs with a cash flow analysis. Do some research in the area to find out what other properties are renting for, which should be based on properties of a similar size, number of bedrooms and bathrooms, and other features, such as a garage, finished basement, and other amenities.
After you have an idea of the rent amount you can realistically charge, subtract the mortgage payment with property tax and homeowners insurance, maintenance costs, and other costs you will be responsible for paying for on the property. If, for example, you plan to keep up on the property's landscaping with a professional landscaper, make sure this is included in your cash flow analysis as an expense.
Look For a Rent-able Property
Another important tip when you search for a rental home is to find a home that will be a great potential rental because of its location and features. For example, a rental property that has a garage, a kitchen dishwasher, washer and dryer hookups inside, or more than one bathroom would be a more attractive rental property than one that does not have any of these features. So as you tour through properties, ask yourself what features would boost a property's rent-ability and make it more attractive as a rental.
A property that has a detached garage with a workshop in the backyard could make a property more attractive to a renter and could also provide you with the opportunity to ask for a bit more in rent. However, be sure you don't overcharge, as this can deter a potential tenant.