Now that the housing market is on the upswing, some homeowners are considering purchasing an additional property to take advantage of remarkably low home prices coupled with low interest rates.
Is it wise to invest in a rental property?
If you’ve ever dabbled in the idea of becoming a real estate investor, now may be the best time to take the plunge.
According to expert realtors, this is the first time in years that the perfect storm has struck: In many areas of the country, home prices are lower than ever, and interest rates are just as low. This means that it is inexpensive to borrow and buy, creating the perfect opportunity for novice and experienced investors alike to purchase a new property.
4 steps to take before buying a rental property
But not so fast… Before deciding to invest in a second home, it is important to use the following criteria to ensure that you are purchasing a good home that will serve as a sound investment:
1. Start with the right real estate agent. Working with the right real estate agent can make or break your investment property buying experience. If you are looking for a home in a specific area, it is best if the real estate agent knows the neighborhood and region well to find the right home to meet your needs. If you’re looking for a rental property in another city or state, work with a local real estate agent who knows what they’re doing; A local real estate agent can also recommend an Austin insurance agent for affordable homeowners insurance when you shop.
2. Research the quality of the neighborhood. The area where you buy can affect a property’s current value, as well as how much it appreciates or depreciates in the future. If you plan to rent your property to tenants, the local neighborhood will also determine how easy it is to find a new tenant after the lease is up. First-time homeowners may do better in a densely populated area with a regular rental turnover, such as near a university or medical center.
3. Check out the local school system. If you’re renting a house with multiple bedrooms, you may want to count on the fact that a tenant is likely to have children and is looking for a good school district. Before you sign on the dotted line to buy a rental home, make sure you’re satisfied with the qualifications of the elementary, middle and high schools in the area.
4. Learn more about local crime statistics. If you buy a house in a high-crime area, you are setting yourself up for disaster in the future. You may have to deal with tenant complaints about habitual criminal activity. When researching crime statistics for a neighborhood, it’s best to check public records or your local police station. Specifically, learn more about misdemeanors, felonies, and vandalism rates. Also, make sure you have a strong homeowners insurance policy that protects you as a landlord as well as your tenants in the event of theft or vandalism of your property.