Tips For Buying a Rental Property

Buying rental property is a great investment right now.  Thousands of foreclosures have flooded the market and are dragging prices down, and the end is not in sight.  But where do you start?  It doesn’t have to be overwhelming if you break it down:

  • Get your financing in line first.  How’s your credit?  Trim down on that extra (unnecessary) spending and start planning for your first purchase!  Figure out what you can spend and how you’ll pay for the property.
  • Find your target neighborhood.  Before I bought my first rental property I drove several neighborhoods, none of which were further than 30 minutes from my house.  Drive through at all hours of the day, talk to homeowners . . . they will give you precious details about the area/residents.
  • Talk to other, seasoned investors who’ve been there, done that.  Join a landlord association.  Read books.  (Mine is a good one. Lol . . . but seriously, it offers tools, tips, techniques, forms, products and advice to simplify the process.)  In other words, don’t go into this blind.
  • Decide on multi- or single-family rental properties.  Multi-family will bring in more money but is more labor intensive.
  • Look at your personality, work life and home life — do you have the time, etc. to manage your own properties?  Not everyone is equipped to do this work.  Some people have time constraints that prevent them from doing it, others have personality constraints that make it difficult.
  • If you’re not going to do much of the work yourself, find honest, reliable subs before you buy.  You’ll want to hit the ground running as soon as you close on a property, so you’ll need to have your workers all lined up and ready to go.

There’s so much involved in buying rental properties, especially as a first time buyer.  But it’s fantastic for income and long term investment, and now is an excellent time to consider jumping in . . .

So prepare well, trust yourself, and go for it!

That “Decorator” Touch

When I get in discussions about buying rental properties I’m usually asked about amenities.  “Do you provide window coverings?  How about throw rugs, shower curtains?  Do you use two-tone paint and decorator colors?”

My answer to these questions is always the same.  It depends on the neighborhood.  First and foremost, this is not YOUR home in YOUR neighborhood!  Don’t overdo it on the rehab and amenities.  I’ve seen investors make this mistake again and again.  And they never recoup that money they spent in crown molding, granite countertops, etc.  Your rental has to measure up to those in the surrounding area.  Period.

 I rehab my places to fit the nieghborhood.  As for the small amenities prior to renting them out, this is what I do.  For all of my rentals, I supply exterior and interior door mats, to protect my flooring.  My friends save their gently used bath and other rugs so I can use them in my low-income rentals.  They add a homey feel to my units.  I also hang mini-blinds or curtains, at all of my rentals.  These can be bought cheaply at Wal-Mart or Target and they really improve the ambience of the home.

Paint is an entirely different story.  For my lower-income rentals, I started out using one color — a creamy beige — throughout. But a few years ago I began using dark brown on the trim.

I realized that using this dark color saved me tons of time on repainting when people moved out.  After all, the doorways, baseboards, cabinets take the brunt of it in nicks, fingerprints and other dirt.  The dark paint allows me to wipe down these areas with a damp rag and Krud Kutter (for the most part) instead of repainting — a great time saver!  And, people like it.

 (By the way, Kilz Casual Colors is the best deal going.  I use latex satin.  It covers amazingly well, doesn’t splatter, and compares to brands that are twice as expensive.  It runs about $23/gallon, and  Consumer Reports touts it.)  For my middle- or upper-middle income places, I use current colors for the walls and trim, of course. 

If you’re unsure of what the neighborhood holds, you can always check it out for yourself.  Schedule a showing at a nearby rental . . . you could be looking on behalf of your son or daughter, right? . . . and see what you’re up against. 

Remember, you’re in this to make money, and whatever low-cost perks you can add to your rental  to improve its appeal will result in higher rent.  And, higher rent means more money in your pocket.   We like that . . .     🙂