Owning a property is the first step to being a rental property business owner. As attractive as this business is, the amount of money needed, the potential liabilities and the legal responsibilities are often overwhelming. Structure your early deals in a way to mitigate risk while getting more experience.
Year-over-year change Up 2. Lending requirements for personal mortgages have relaxed in recent years, but Jim Merrill of Axel Mortgage Inc. However, Merrill says, "Once we can show that someone has two years of successfully managing rental property, we can use that to offset the income requirement.
Roberts suggests starting with a single house or smaller multiple-dwelling unit, perhaps with a partner, to see if the business really suits you. Condominiums usually require a larger down payment and monthly association fees. Starting with a single home will allow you to get a feel for the maintenance, bookkeeping and other work required.
Roberts and Merrill both recommend choosing an initial property without high-maintenance features such as elaborate landscaping.
An old joke is that the three keys to a successful business are "location, location, location. For that reason, investing in out-of-state property is a gamble. Buying in neighborhoods you know well or have carefully researched is the smart move.
Figure out the right rent. Rents differ widely around the United States.
Then you need to determine if that rent will be enough to cover your costs. Not budgeting enough for maintenance is a common mistake. Professional organizations such as the Institute of Real Estate Management have more information on the income and expenses that come with different kinds of property.
There are formulas, such as the "capitalization rate," to help with this, but you might want to turn to a professional. A good accountant can make sure the purchase makes sense. Department of Housing and Urban Development.Nov 23, · Get the latest headlines on Wall Street and international economies, money news, personal finance, the stock market indexes including Dow .
Bring it together in a business plan for your rental business – a rental business plan. A business plan is essential for the success of your business.
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