Buying a home you intend to rent out or purchasing an investment property is no small task. There are many things that can go wrong that can cause you to lose money. Although real estate is typically a sound investment, especially when you consider that more people have become millionaires through real estate investing than by any other means, it is still risky. Read on to find out how to buy a Pleasantville home you intend to rent out.
Determine Whether You Are Ready to Be a Landlord
The first thing you should do before taking any other steps toward buying a Pleasantville home to rent out is to sit down and take some time determining whether you are ready to be a landlord. It’s a job that comes with all kinds of headaches and typically requires some handyman skills and experience.
Ask yourself these questions: “Do you know your way around a toolbox? How are you at repairing drywall or unclogging a toilet? Sure, you could call somebody to do it for you or you could hire a property manager; however, that will start to decrease your profits. Property owners who have one or two homes often do their own repairs to save money.”
In the beginning, you really need a positive cash flow. Doing your own repairs and maintenance can help you achieve that. As you add more rental homes, and increase your monthly rental income, you will probably want to hire out the work needed to have more time to manage your properties.
Find the Right Location When Buying to Rent Out
The next phase of buying a rental home involves finding the right location. You certainly don’t want to purchase a rental in a declining neighborhood or in an area with bleak economic prospects.
When buying a Pleasantville home you intend to rent out, “look for a location with low property taxes, a decent school district, and plenty of amenities, such as parks, malls, restaurants, and movie theaters. In addition, a neighborhood with low crime rates, access to public transportation, and a growing job market most likely translates to a larger pool of potential renters.”
Some of the things you should look for in the location where you want to buy a home to rent out include:
- A high demand for rentals
- Good prospects for positive cash flow
- Lenient rental laws and regulations
- Low price-to-rent ratio
- Safety and low crime
- Good schools
Find the Property and Conduct an Investment Property Analysis
After deciding on a location, the next step is to find a property and conduct a subsequent investment analysis.
Finding a property will require some thorough research. You should lean on your Pleasantville agent’s expertise to help you find the right rental property.
“The next step when buying a [home to rent out] is conducting an investment property analysis. Once you’ve found a property (or a few) that you think may be a good real estate investment, it’s time for a more thorough analysis. With investment property analysis, you compare different investment properties, along with data attached to these properties . . . to compare and estimate how they will do once rented out. In this way, you will be sure to find the best investment property in the market of your choice.”
Carefully Consider Buying/Financing Options
Having found a promising property option, you then need to carefully consider the financing of the purchase. Typically, the two purchasing options are buying with cash (if you have the means) or financing the purchase.
For those looking to buy a Pleasantville home they intend to rent out and fortunate enough to have plenty of cash on hand, buying with cash can help them generate a positive monthly cash flow right out of the gate.
“On the other hand, financing can give you a greater return. For an investor who puts down 20% on a house, with compounding at 4% on the mortgage, after taking out operating expenses and additional interest, the earnings add up to roughly $5,580 per year. Cash flow is lower for the investor, but a 27.9% annual return on the $20,000 investment is much higher than the 9.5% earned by the cash buyer.”
The more desirable option for you depends on your investing goals. Call (914) 341-2998 to talk to a Pleasantville agent who can help you navigate this process.
Negotiate When Buying a Home to Rent Out
Many first-time investors buy fixer-upper properties or at least ones that are priced low because it needs work, and you’ll likely do the same. Just don’t be afraid to negotiate a better deal just because the property is already priced low.
Here’s what you should know about negotiating when buying a home to rent out: “Remember to negotiate. The seller’s asking price is usually not the price buyers end up paying. There’s definitely room for negotiation. You can definitely get the real estate property for a few thousand less with the right negotiation tips.” And most of the time that means relying on your agent’s negotiating expertise.
The process of buying a rental property is a different process from buying a residential property to live in. For the assistance you need in buying a Pleasantville home to rent out, contact us today at (914) 341-2998.