So you’re thinking about buying a residential home, perhaps a condo, townhome, a duplex, or a villa to rent out most of the year. You want to use it to facilitate a steady stream of income to supplement your own and, to boost your assets to prepare for retirement. All of this, not to mention the fact that can be something you can pass on to your children for their benefit in the future.
You’ll have the ability to use it as collateral to purchase more residential properties to rent out and add to your portfolio. Or, to use as a means to get a personal loan to make improvements to your primary home. Having a rental property also gives you the ability to use it as a vacation property if you don’t want to rent it out on a yearly lease basis for visiting family members.
When you elect to do that, you can really cut down on income taxes, particularly if you only rent it for a small amount of time. However, if you want to keep it occupied year after year, you’ll have to pay income tax, but can write off certain expenses. The important thing is to really understand the rental market in a particular area and how it has historically performed over the years.
UNDERSTANDING THE RENTAL MARKET
The rental market is decidedly different from the purchase market. Location becomes a bigger factor in the majority of cases because renters can rent in a location of their choice. You’ll also be competing with other rental property owners, as well as apartment complexes and the many condo and townhome communities which allow owners to rent their units.
“If you are particularly uncertain about the future, you should look for a home with potential rental appeal when you are looking for a place to buy. Think about who rents condos, townhouses or single family homes in your area and what features they would appreciate. For example, you can buy near a college, university, law school or medical school in order to have a continuously renewed population of renters as each class graduates and new students arrive.” —Realtor.com
In addition, rental properties which stay occupied are the ones next to large corporate parks, in downtown districts, near colleges and universities, and those near or on the beach or waterfront. Of course, this means the entry price will be higher when purchasing, but it will yield higher monthly rent.
CHOOSING THE RIGHT RENTAL INCOME PROPERTY
Okay, so you know to purchase a rental income property that’s in a very desirable and/or strategically placed location. What you should also know is that location isn’t the only thing you ought to be concerned about. You should learn about the home and here are some more factors you should be aware of when finding a rental property:
- Think about who will be renting. It’s more than likely you’ll be renting to twenty and thirty somethings, so choose a property that fits for couples and is suitable for a family of three or four. Also, choose a home which is kid safe, because even if you rent to a young couple, once they have children, they might be looking for something else.
- Know which updates to make. New appliances are one thing which make a big impact, along with a fresh coat of neutral paint in every room. Instead of replacing cabinets and countertops, refinish them and choose laminate, tile, or engineer wood rather than carpet.
- Consider using a property management service. Being a landlord can mean having to deal with things, such as emergency repairs, so either provide your renters with the names and numbers of your preferred service vendors or hire a property management service.
- Be prepared for unoccupied periods. You should have enough in the bank to cover three months of no rental income but still having to maintain the home and pay the taxes.
- Don’t skimp on the lease contract. It’s very tempting to download a residential lease or pick up a prepared form from an office supply store, but it’s best to pay a small fee and have a real estate attorney produce one.
- Work-up a marketing strategy. It’s best to advertise in key places, such as travel publications and foreign publications to get the most exposure.
It bear repeating, you should choose a location that hosts a lot of visitors, like Sarasota for its world-renowned beaches, weather, culture, and lifestyle. This will ensure your rental property stays occupied continually and choosing such a great location means having a dedicated place to vacation in one of the best places in the Sunshine State.
It’s not only great for the sun and fun, but it’s close to family friendly attractions, such as Lowry Park Zoo, Busch Gardens, Adventure Island, and Little Manatee State Park. It’s also home to some the best golf, tennis, shopping, dining, and entertainment around.