Investing in rental homes is looking like a good idea again

Back in 2006 and 2007, 61% of my sales were of rental properties. It worked out to a total of 41 single-family homes that I helped investors buy. With the mortgage meltdown, lending guidelines to investors got incredibly tough, so I've only sold a couple of homes in the last two years as investments. But the banks are starting to relax a little now, so investors may find it easier to get mortgages.

The fundamentals of a good rental property are still the same. Here's what I wrote back in 2007:

If you're relying on the advice and experience of an agent to help you find a good investment property, here are some questions to ask:

1. Have you ever rented before, preferably a house?

2. Have you ever been a landlord/landlady?

3. Have you ever done property management?

4. Have you showed or leased rental properties?

Naturally, I have the right answers to these questions!

1. I have been a tenant of innumerable apartments and four single-family homes. By the way, I always got my security deposit back and a good reference.

2. I have been a landlady in Hawaii, Texas, and in England. I currently own and manage three rental properties in Texas.

3. I have managed several properties, both single- and multi-family, and still manage one property for clients.

4. When I first started out in real estate, I showed rental properties "for practice." I currently specialize in selling as well as marketing, but not managing, rental properties for lease.

Here's a tougher question: What's the most important aspect of a good rental property? Answer: The tenants you'll get for it.

Just like the tenants I market rental properties to, I wanted more than just shelter. I wanted a neighborhood that seemed safe and quiet, and was not too far from work or school. I wanted enough room for my furniture plus some storage space. I wanted a nice yard to look at and relax in, because I was tired of living in an apartment. I wanted to be able to park my car close to the front door. I wanted a feeling of privacy-again, something you don't always get in an apartment. I wanted a comfortable, clean home that didn't gross me out thinking of the people who had lived there before me. It didn't have to be new, just nice and clean. Fresh paint, unstained carpet, no smells, no bugs.

The same holds true to some extent for duplexes and fourplexes, but I have never liked them much. They are a compromise between apartments and homes in the size, storage, and privacy features. Accordingly, they should rent out for a rate between an apartment and a single-family home, and should be priced that way, too (but they often aren't). The good ones at least offer a fenced, private yard and a garage. I had a certain amount of money to spend on rent every month, and I wanted as much as possible for my money-especially since I was going to have to commit to living somewhere for a whole year. So if the home had a bonus room (fourth bedroom, study, or game room), nice kitchen, fireplace, garden tub, or covered patio, it would be at the top of my list--and I might even be able to come up with another $25 or $50 for something really fabulous.

Do you want tenants who will trash your property and/or not pay their rent on time? Just offer them a home in a neighborhood where there are mattresses out on the sidewalk and trash blowing on the streets. Or one where the flooring is different in every room and the walls have not been painted in years. Or one with no grass in the yard. Or one that is just plain dirty.

You have to give to get. Real estate is a people business, not just a numbers game. Somebody has to actually want to live in the property, whether a tenant or a buyer, for you to make money.

So buy a home that somebody wants to live in.

Today, I'd go a step further in these times of economic uncertainty: Buy a rental home that YOU might want to live in.

 

Robin Rogers, Realtor, Broker-owner, ABR, TRC, CRS

Also Cat Owner, Photographer, Smartass, Aspiring World-Class Drummer

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