With great rates, lots of inventory, and stricter lending guidelines, now's an excellent time to increase or begin your rental property portfolio.
Many homeowners are afraid or reluctant to become landlords, but with a few proven strategies and processes in place, your rental properties can become a passive income stream that adds to your net worth.
There are several ways to add to your rental inventory, including purchasing a resale property from the homeowner or bank, as in foreclosures or REO's, purchasing new construction from the builder, bidding on the courthouse steps, and converting your current home or inherited property to a rental.
Develop your business plan first.
Determine how you'll acquire the property and where you'd like the rental home to be located (in the same city as you is best; long-distance land lording isn't ideal) and the price you'd like to pay for it.
Next, evaluate the current rental market for rental rate estimates on similar properties currently rented in the area you've targeted - this will help you anticipate the type of renter who might apply: an executive, a first-time renter, etc.
, and your potential return on investment.
Ask your full-service REALTOR® what renters are looking for when touring.
If a garage is a must-have for most renters in your market, be sure the property you purchase has one.
Investor rates are a bit higher if you must get a loan to make an investment purchase, but if you have enough equity built up in your personal home, you may be able to purchase a resale, foreclosure, REO or new construction house, condo or townhome with your equity line by simply getting a certified check from your bank the morning of closing.
Want to convert your current home to a rental and move up? You can if you can provide your move-up lender a 12 month lease on your current property, using only 75% of rental income to help qualify for your new mortgage, IF you have at least 30% equity in your current property.
In servicing the rental, you have several options.
You can pay a management company to handle everything on your behalf, or you can be more hands on, screening the calls, meeting the potential clients, to negotiating the lease and managing all the details.
Whether you decide to hire it out or do it yourself, you must know what to do or what should be done for you, to protect your best interests.
For specific strategies on qualifying prospective tenants, from your first sentence when answering the inquiry call to eliminate riskier applicants, to what to include on the application and lease, consult your full service REALTOR®.
They're there to help you navigate the strategies and processes that will make you a successful rental investor.