Diving into the world of real estate is an exciting step into your next business venture. There are plenty of opportunities to succeed and build a steady flow of income. We’re here to help you prepare for buying your first rental property.
First, you’ll want to get some necessary information from the seller or seller’s agent. Find out how long it’s been since someone lived in the house. Please do your best to investigate the prior residents and how many people lived in the home. Things could pop up that will be a cost to you even if they recently moved out.
As an example, consider whether there was one person or a family. When only one person lives in a rental there really isn’t enough volume to problems detected.
In the rest of this post, we’re outlining other factors to consider before taking the plunge.
Factors to Check Before Buying Your First Rental Property
Water issues are one of the most significant concerns and expenses for a home. Be sure to check these areas during the initial inspection.
Test the shower and faucets to ensure the hot water turns on. If it doesn’t, you will need to check the status of the water heater and may need to purchase a new one if it’s not working. You can negotiate this into the purchase price.
You’ll also want to check that the bathtub, if there is one, holds water and drains properly. If it’s not draining well, that could mean issues with the drains or clogged sewer lines.
Speaking of sewers, if there are large trees on the property, that can lead to issues with the sewer lines. Roots can grow into the lines and cause clogging issues. If you notice a problem with how the home’s drains work, you should call a plumber and see if they can clear the pipes and get their opinion on the future state of the plumbing.
HVAC Life Expectancy
One of the most significant expenses you’ll have in your home is the HVAC unit. During the inspection, ensure that the furnace and air conditioning equipment is well maintained and less than 15 years old.
If you need to replace the unit, consider negotiating this into your purchase price. On average, a new furnace alone can cost around $5,500. Add $3,500, on average, if you’re adding central air.
One of the biggest complaints about a living space is around storage. Put yourself in your future tenants’ shoes when you’re looking through potential properties. Is there enough storage to comfortably organize and keep clutter at bay?
Don’t forget to consider the bathroom and vanity areas and kitchen. There should be plenty of space to store accessories, tools, and pantry items to avoid frustration. Ample storage space helps tenants build a comfortable living space and will ultimately make them happier with their home.
Strange Renovations or Layout
We were recently approached by a homeowner that transformed a three-bedroom home into a two-bedroom. Our opinion was that this was a mistake because the neighborhood had a lot of families with great schools.
If we were to purchase the home, we could convert the room back to a bedroom, but it would be a significant investment on our end.
If something seems strange or odd with the layout during your initial walkthrough, take note. Making renovations to the home takes time and money. It may be better for you to find a more move-in ready home when buying your first rental property.
The price you pay for the home matters. It would help if you considered how much you could charge for rent based on comparables, bedrooms, size, and neighborhood. If the home has excellent curb appeal and is in good shape, it will have a higher purchase price than one that needs more love.
Take time to determine how if your rental rate will pay the mortgage to decide if it’s a worthy investment.
If you have questions about buying your first rental property, we’re here to help. Give us a call today. We would love to talk to you through our experiences and get you on the path to successful property management.