In recent years, more and more people are starting to dream and talk about financial independence and passive income. One of the best ways to passively make money is to become a landlord and to use the money people pay you as rent to pay off the mortgage on your rental properties. While you may often hear that investing in rental properties is either a great or a terrible idea if you actually decide to take this road, there are a few things you should know about rental property investment:
Take property taxes into account when purchasing rental properties
Depending on the state and county you live in, property taxes may or may not be a big annual expense for you. But even if your state offers some sort of a property tax exemption or cap on your primary residence, keeping your property tax bill low, these exemptions won’t apply when you buy a house to rent, so you should carefully research how much you can expect to pay in property taxes. This information should be carefully evaluated before you purchase a home to rent and taken into account when setting your rent, as the last thing you want is to end up spending more money than you make on the rental property.
Be aware of the damage tenants can do to your rental property
If you know any people who rent out their property or if you visited any landlord forums when preparing to buy a house to rent, you probably have heard and read horror stories about terrible tenants who had destroyed the home they were renting. Unfortunately, while there are lots of great tenants out there, there are a few bad apples in the bunch and people can do a lot more damage to your property than you’d ever expected. So how can you protect yourself? In addition to collecting a security deposit and having the tenants sign a robust lease, you should make sure to visit the property often, as lots of damage can be done to your home in just a few short months.
Buying a house to rent teaches you to appreciate good tenants
As a new landlord, you may think that the only thing that matters when renting out a home to new tenants is the amount of money they pay as rent. However, things are not quite this simple. As you can guess from the previous item on the list, rental property repairs can add up to thousands of dollars. In light of this, when you find good tenants that always pay their rent on time and take care of your home like if it were their own, it’s worth doing everything to keep them from moving out. This is why some landlords decide to charge lower rent or forego incremental rent increases altogether when they find good tenants.
Set money aside for repairs on your rental property
No matter how new the rental property you purchase is or how careful your tenants are, things will break and often urgent repairs will be needed at the least convenient time. This is why it is crucial and you create an emergency fund for your rental property to ensure that when repairs are needed, you don’t need to dip into your personal savings or even take out a loan to pay for them.