Residential Real Estate: 4 Things to Consider Before Buying a Rental Property

Every city has them. Properties where people live under a lease agreement that pays the property owner a monthly sum. Ask some landlords whether owning a rental property is a good idea, and they’ll tell you horror stories that make you never look at an apartment building the same again, while others relate a happy tale of great income and good tenants.

Realities of Rental Property

In reality, the experience of owning rental property depends on a multitude of factors, such as the property location, annual rent, annual expenses, whether it’s a single residence or a multi-family, how many units the place has if it’s a multi, and a realtor who sells rental properties could surely list more.

There are, however, some essential things that all prospective rental property owners should consider before they sign a mortgage for an investment property. If you’re thinking about buying a rental property, considering these things will impact on how satisfied you are — financially and otherwise — with owning the rental property.

Empty Building Syndrome

If you build it, they may or may not come. For monthly income, rental property is only as valuable as its ability to stay occupied. This is why it’s wise to buy properties whose units are occupied, preferably by long-term tenants on at least 1-year leases. Because occupancies invite other occupancies from a social standpoint, filling up a largely empty building can be more challenging than one thinks.

Plans for Owner Occupancy

Occupying one of your units decreases your rental income, but it yields some nice perks: You own a place that at least one other non-owner is helping you pay for, you get to choose your closest neighbor(s), and — let’s be honest — it’s hard for tenants to skip out on rent when the owner literally lives next door.

In addition, owner occupancy gives you great control over how your property is maintained. You see things when they happen, and not just when a tenant decides to tell you about an issue.    

Desire for Passive Income

We make passive investments without planning to do much to make them profitable. Leasing a famous painting to an art gallery is highly passive. Some people expect roughly the same experience from owning rental property, but there’s a big difference between a wall painting and an occupied residence: The latter gets wear and tear.

If you own a multi, you’ll get plenty of calls yearly about making repairs — and if you can’t defer those jobs to a property management agency, you’ll be even more involved, fixing problems. For the do-it-yourself landlord who wants passive income, owning a valuable, single residence property should be considered.

Hiring a Property Manager

Property managers come in all stripes and colors. Some are one-man businesses, others are contractors, and still others work for management companies. The type of outfit you use affects price, but the simplification property management brings is worth the money, especially for investment property owners who plan to build a portfolio of rental real estate.

Property managers can handle the administrative detail work the landlord doesn’t want, and arrange for properties to have as-needed repairs and scheduled maintenance. It’s an investment that can make ownership less stressful, while ensuring property is well taken care of.      

Interested in Rental Property? 

Owning rental property isn’t for everyone, but if earning money from pride of ownership in property interests you, then the rental property market could be the place you need to be. Regardless of what property you acquire and how you envision owning it, American Eagle Credit Union has investment property mortgage options to make the purchase a reality.   We’d love to hear about your rental property ownership plans, and see how we can help you get there. Call us today at today at (800) 325-9905, or use our contact form.  


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