Investing in Rental Properties
Investing in real estate can be a good move now, with housing values slowly increasing as interest rates remain low. Many people dream of having a rental property to offset the rest of their expenses; a property that not only pays for itself, but that pays for a number of other things too. While there are definite advantages to investing in rental properties, it’s a subject area you want to explore completely before diving in. You’ll also want to take a good, honest look at yourself. Not everyone is cut out to be a landlord, and you’ll be investing not only your money, but your time. Do you feel strongly that you have what it takes, both personally and financially? The following are some items to consider when contemplating rental property investments.
Considerations Before Investing In Rental Property
Investing in rental property involves genuine risks, and before investing your hard earned money, you’ll want to be sure this is the best and most opportune investment for you to be making. Whether the property you’re considering is here in the Bronx, in Westchester, in Manhattan, or anywhere else for that matter, investing is a calculated risk, and never more so than with rental property. You want to take a look at the greater financial picture before taking this risk by considering the following:
Financing: Can you afford to pay for the property outright, utilizing resources, or will you need to take on a mortgage, which will increase your risk?
Can you get an affordable mortgage at a good rate? There’s no point biting off more than you can chew, or having high interest rates eat up your profits. Mortgages for investment properties will carry higher interest rates.
Are your current investments diversified enough? Be sure not to put all of your eggs in one basket. If you have a limited amount to invest, you may not want to put the majority of it into a risky investment such as rental property.
What if you don’t get any renters? Can you afford to go a few months – or longer – having to pay for the property yourself? Even in the best real estate markets, there are rental lulls. You want to make sure you’ll be able to ride these out.
Don’t forget the tax ramifications. As a rental property owner, you’ll be able to claim your property as a business and post profits and losses. Look at the total effect purchasing a rental property will have on your taxes.
Buying Rental Property
Once you’ve made the choice to buy a rental property, there are some important considerations in selecting the right type and location for your property. Before looking at properties, bear in mind the following:
Who will manage the property? You may have the desire to do this yourself, or opt for a rental management company. Hiring a management company costs more, but it saves you the time and aggravation of finding the right renters, as well as maintaining the property. At the same time, you may have more time to invest and want to be more ‘hands-on’ and do these things for yourself.
Know the neighborhood. Look at the surrounding properties, the schools, and the community as a whole. Is this a vital or even revitalizing community on its way up, or is a troubled area that could potentially drag you – and your money – down. If the property is at the beach or in the mountains, look at how Mother Nature could potentially give you headaches through events like ice storms or hurricanes.
Keep your ‘best price’ in mind, and don’t be talked into taking on more than you can chew. Be realistic about potential profits and losses.
Contact Our Experienced Real Estate Attorney
At Cavallo & Cavallo, our experienced New York real estate attorneys can help guide you through every step of the real estate investing process, and help you find a property that suits your needs. With offices in the Bronx and New Rochelle, we can assist you with all of your real estate needs.