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Are you considering getting into the business of owning rental properties? Long-term real estate is one of the best ways to keep your wealth securely invested, and you can also make great returns in the form of rental revenue. However, there are many different aspects to owning rental property, from the legalities of being a landlord to marketing your listing and finding tenants. If you’ve never owned rental property before there will be a lot to learn, and it can be a bit overwhelming. In this post, we outline some of the basics of renting out property to give you an idea of what it will entail. While we won’t be able to cover all the details of owning a rental and being a landlord, we encourage you to do research of your own so that you can be a better-informed investor.
Do some calculations before you make a purchase
You’ll need to do some math to determine exactly how much of a return you can expect from your rental. Any given property will need to produce a significant cash flow to be profitable, especially once you factor in all the costs associated with operating a rental business. There aren’t just the usual mortgage, insurance, and utility fees to consider. There will also be maintenance costs, licensing fees, furniture, appliances, marketing fees, plus HOA and accounting fees if applicable. When determining how much you’ll be able to charge for rent, look at similar properties in the area and compare them to the size and condition of your given property.
Familiarize yourself with rental laws and regulations
There are some legal aspects of owning rental property that you should be familiar with if you’re looking to get into this type of investing. First, you should know the Fair Housing Act, which prevents landlords from discriminating against tenants because of race, national origin, religion, sex, family status, and disability status. You should also look into your state and local laws regarding rental property; certain areas will require that you file a permit for every property you rent out.
As for taxes, you’ll be able to write off most of your business expenses, and the costs associated with the property itself. Consider working with an accountant or tax professional to get the most out of your write-offs.
Find a great tenant
A bad tenant can end up costing you time, money, peace of mind, or any combination of the three. That’s why it’s incredibly important to take the effort and screen your tenants before signing a lease agreement. It’s fairly standard procedure for a landlord to conduct a background check and credit check, but you will also want to ask for proof of income. All these items will help ensure you have a trustworthy tenant that will pay on time.
Having trouble finding a tenant? Consider posting your property on listing sites like Zillow or Trulia. You can also post your rental on Facebook Marketplace or Craigslist.
Sign a lease agreement the right way
Your lease agreement will contain all the terms and conditions surrounding your rental property, which will be signed by both you and your tenant. It’s very important to establish any policies you have in writing, and it’s also up to you that your tenant knows these policies. This is also where you can establish any penalties for breaking the conditions of the agreement. For example, some landlords have a late fee policy to deter tenants from missing their monthly payments. Any other conditions you have should also go in the lease agreement; you might want to inspect the property once or twice a year to ensure it stays in good condition. The lease agreement is the perfect place to make these policies known.
RCN Capital
The easiest way to save on your next rental property investment is to obtain financing from a trusted real estate lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. If you are an investor looking to finance a rental property, RCN Capital has competitive loan options available. Connect with us today to discuss your next real estate investment.