More than three-quarters (77%) of Americans would rather rent their home than own it, according to The Zebra. This preference for renting and the economic situation is causing more people to invest in short-term real estate.
Buying a home to rent it out might sound like the purview of millionaires, but the majority of landlords are private citizens who own one or a handful of rental properties.
How do you become one of these landlords? What are the ins and outs of rental property investment? We'll offer some real estate investment tips here so that you can become a landlord and start earning a little extra money.
Know the Location
It's become a cliche to say that real estate is all about location, but it's cliched for good reason. The most lucrative buy-to-rent strategies involve researching where your property is and how that neighborhood functions. Does it have an HOA? Are there any zoning laws you need to follow? What's the average income in the area?
Failing to learn any of those things could sink your real estate ambitions. Homeowners' associations can set rules that limit what you can do with your rental property. Violation of zoning laws can cost you money that you could've otherwise invested in your property. Miscalculating the average income in the area could cause you to overvalue or undervalue your property.
Understanding Property Taxes
The goal of investing in real estate is to earn a profit, so you need to calculate your expenses. The last thing anybody wants to do is invest in a property, find great tenants, and then realize at tax time that they can't afford the property taxes. That's why our next real estate investment tips involve property taxes.
Most states with low property taxes are in the South or West. The states with the highest are clustered around the Midwest and New England areas.
Property taxes and income go hand-in-hand, which offers a few strategies when buying a home to rent it out. Tax rates are often lower in lower-income areas, while higher-income areas pay more taxes. Taxes play into school quality in the same way. 92% of funding for American schools comes from the local or state level, according to the Department of Education.
Save Up Money
Any income property buying guide will tell you that before you can focus on maximizing rental income, you need to gather the money to buy the property you want. This isn't as easy as it sounds, though. You'll need quite a bit of money, and there are a few ways to get it.
Taking on a partner is one way to finance a rental property. They add a fresh perspective and can help you secure larger loans. Your other choice is to wait to buy a property until you've saved up enough money to afford it outright.
Buying a Home to Rent It Out
Buying a home to rent it out can be a great investment, but it comes with pitfalls. We've discussed a few of them here, but there's always more to learn.
You can learn more about property management on our blog. You can look into our services at Property Management Inc to see what we can do for you.
