The investment property is very attractive to many people that want a consistent return on their investment. This consistent income is perfect for people on fixed budgets or that want to live comfortably through retirement. Picking the wrong investment property can be a money pit if there are massive repairs to be done or there is problems renting the property at all. The odds of disaster are greatly reduced through doing appropriate research on investment properties in a specific area. Managing a property can vary immensely depending on variables such as quality of renter as well as quality of neighbors. The following are factors to consider when buying and managing investment properties.
Property Management Or Manage It Yourself
Property management companies are great options for people that have purchased investment properties outside of their hometown. The advantages to having a property management company are immense for a reasonable fee. Usually the fee is a small percentage (under 10 percent) of the monthly rent as a fee with one month’s rent being taken the first month. For the most part these companies can increase the price of rent so the money you receive could be more than if you didn’t use the company with the fee subtracted. The fact that they have access to rental history records and do background checks can help assure a property has the right type of tenants. For those people looking for truly passive rental income hiring a property management company is the best option.
Forming An LLC For Their Properties
Forming an LLC if you have multiple rental income properties needs to be done. This will help keep your assets within the company and are completely separate from your personal assets. In case of a lawsuit this will protect the owner in an immense fashion especially if they have insurance that covers accidents by renters. Keeping all of this financial information separate can also make it much easier come tax season. This is easier due to not having to organize finances between rental income, expenses, and other details. Being able to pay with a company credit card or purchase a property as a business entity also comes with its own advantages. LLC’s for rental properties will help protect you as the investor long term in regards to your personal assets.
Laws For Americans Owning Property Abroad
Before investing in a property in a foreign country it is imperative to know what the laws for owning in that country for foreigners are. Each country has different laws as well as taxes which could add a sizable amount to the property’s overall price. There are specific countries that ban those from certain countries from owning land there for one reason or another. Usually this happens when the countries have been hostile in the past or disagree about something fundamental. Finding legal representation in the country you are buying is essential as you do not want to have a deal fall through or end up being ripped off.
The Health Of The Housing Market, Not Just The Rental Market
The rental market in specific areas could be booming without the housing market being healthy. This can lead to a huge loss in investment if the property decreases in value and you have to sell before the market recovers. The housing market being healthy will help the home appreciate in value while it is producing income which should be the goal of every investment property. Luckily home selling aggregators do a good job in allowing consumers to see how the housing market is trending in a specific area. Looking up what comparable homes sold for a few years ago can allow you to see truly how healthy the market is.
Maintenance Costs For The Property
Picking an older property can end up being a nightmare as having to replace a roof can cost a few months’ worth of rental fees. Even having to replace the air conditioning unit can cost thousands of dollars so maintenance is imperative. Plenty of issues compound and worsen when ignored so take a proactive approach about maintenance. A maintenance man can be provided by a property management company as well so keep this in mind when making the decision.
The factors that can impact the profitability of an investment property vary in reason as well as overall impact. Earning income annually from various rental properties can allow you to truly build a decent amount of wealth. For those people looking to retire early investment properties might be the answer if you can afford a few. Start looking into areas that you would be interested in owning a property to see if the area fits your budget and property type desires.