Rental Income and Property Investing

TransUnion is one of the 3 credit reporting agencies who determine your credit score. On the TransUnion blog, there was a post (see below). In this blog piece they give some tips for investing in rental properties and becoming a landlord. They make some good, and obvious points.

“They say everything has a bright side, and you can even find one in the recent real estate collapse. With widespread foreclosures and unemployment, more Americans are renting rather than buying. Is rental property a good investment? Now that mortgage rates have dropped to a 40-year low, investment in rental properties looks like a smart bet.”

There is a combination of events happening right now that make sense for buying property with the aim of renting out for the monthly rental yield, or owner occupying one unit in a 2-3 unit property and doing the same. Rates for borrowing up to 30 years are under 4%, demand for rental properties is high, however, inventory of decent (or not so decent) supply of properties for sale has remained low. Why? Partially this is because there are many home owners who cannot put their property on the market without taking the loss, and partially the banks have been keeping foreclosed properties off the market for various reasons: not to flood the market and depress prices.

TransUnion says you should consider the following for rental property investing:

  • “Go local. If you know the neighborhood, you’ll likely be able to avoid potential pitfalls like crime or a nearby competitive development luring renters. Do a rental property investment analysis first, then find a nearby realtor with experience in selling rental property.”
  • “Think about multi-unit buildings (in New England, we call these properties “multi-family, two-family, or 3-decker/triple-decker). Collecting rent from several tenants rather than one will keep the cash flowing, and single vacancies won’t be as damaging.”
  • “Cover yourself. Set total rent higher than your loan payments on the property, and leave yourself at least a 20% buffer to absorb repairs, vacancies and property management costs. This should be part of your rental property investment strategy.”
  • “Insure it. Many landlords think they can save by skipping coverage, but can’t predict tenant behavior, weather disasters, fires and other unforeseen events. Some experts recommend requiring tenants to have their own renter’s insurance, in addition. The property owner’s coverage extends to repairs and structures, and sometimes the appliances, but not the tenant’s belongings.”
  • “Work with a standard lease for your state from a real estate office or association, rather than a generic form lease from an office supply store or downloaded online.”
  • “Check for environmental compliance. Make sure your building meets the state guidelines for lead paint, asbestos, mold and indoor air quality. If it was built before 1979, there could be painted-over lead paint in the walls.”
  • “Hire a professional to manage the property. Unless you don’t mind a call about a faulty toilet at 2 am on a holiday weekend, pay someone else to look after the daily details. You can focus on improving the property to recoup your investment, while your property manager deals with the nitty-gritty, especially in a larger building or one requiring frequent maintenance.”
  • “Finally, seek out sources of support. Join an apartment association so you have resources for advice, forms and referrals about owning rental properties.”

These are some useful tips. If you are serious, contact us and we will help you find the most suitable property for investment that meets your goals.