What should you know before investing in rental real estate?

Real estate hacks - December 19, 2018

There are only a few things in life more exciting and at the same time scary than becoming a property owner. When putting your funds towards buying a new real estate, there are two possible outcomes – either the value of your property will continue to grow or it will completely tank because of the bad economy. Whether you will find happiness as a real estate owner is impossible to predict. These days, people have learned the value of a dollar, and they know that real estate is the best investment. However, before investing in rental real estate, it would be wise to learn more about the matter. After all, you are probably about to fork in hundreds of thousands of dollars, so you should be careful. As always, Move On Relocation Nashville has got your back! Here are some facts and bits of advice you should use at the moment.

What are your reasons for investing in rental real estate?

Do you have a surplus of money you don’t have any better place for putting? Have you and your spouse talked it over and decided that investing in rental real estate would be the best option? Perhaps you just want to buy a property in a city you plan to retire to, and want to rent it until then? Whatever your reasons may be, have them defined and maybe even written on a piece of paper. The reasons behind your decision will help you choose a suitable property later on. How so, you wonder? Well, if you plan on moving to Tennessee, Boca Raton, Nashville or some other city someday in the future with your entire family, you won’t buy a small studio or a one-bedroom home in the aforementioned city, and vice versa.

An apartment building.

Don’t shoot for the stars

Maybe you are one of the lucky ones and you have a lot of money on your bank account – millions even! With all that money, buying a luxurious property with a pool and an in-house movie theater seems alluring. But, there is one thing you need to know before investing in a rental real estate – the only way to get your money’s worth is by being able to actually find tenants for your property. The truth is that very few people can afford to live in a mansion. So, if you are buying with the purpose of renting, sticking to the norm is better. Buy a home that is suitable for an average, middle-class family, and you won’t be wrong.

Know the risks before investing in rental real estate…

Of course, you are buying a rental property with the sole purpose of making a profit. While you may not be faced with the dilemma of buying vs renting an apartment, you have bigger things to worry about. You need to assess the risks of this move you are about to take and decide whether risking is actually worth it. There are many things that could go wrong when purchasing a rental, and they can all have devastating consequences.

  • Your property may be vacant for long periods of time. 
  • You might stumble upon bad and negligent tenants who could financially destroy your property or some parts of it. 
  • In case you have to forcefully evict a bad tenant, you might have to pay legal expenses, which are not cheap.

Of course, you will always be careful when choosing your tenants. However, not all people will show you their true colors, so you always run the risk of letting bad tenants live and move into your Nashville home.

A hand pointing to a question mark.

…but be aware of the benefits, as well!

For every bad thing that could come out of buying a rental, there are as many good things to balance out the situation. For starters, you may be lucky enough to buy a property that is in a nice location. A middle-sized house in a good school district will never be vacant! People are constantly moving locally in Nashville, searching for better properties. There will always be families ready to move in and to pay you a nice amount of money as compensation for renting your home. Besides, the value of your rental could go up with every repair and upgrade you make, so you might be able to financially profit from buying such a real estate a few years down the line. These are all nice predictions for your property, don’t you think?

Know your responsibilities

When purchasing a real estate for rent, you will practically become a landlord. And landlords have a lot of rights and just as many obligations. For starters, you won’t be able to barge in your home whenever you want. This will actually give your tenant grounds for taking legal actions against you. Instead, you will have to give them a notice of your arrival at least a day before dropping by. Besides, you will have to maintain the property at all times and cash in all necessary repairs, which is not cheap, as you already know. So, before investing in rental real estate, think whether you are capable of handling the responsibilities which come with being a landlord. 

A man looking at charts and thinking before investing in rental real estate.

This will be a huge change in your life

And it will definitely be a stressful one. At least until you find those first tenants and start getting back some of the money you invested. After that, it should be smooth sailing. Just remember that before investing in rental real estate property, you should not expect that you will find a tenant the next day. While not impossible, this very rarely happens in real life, as the screening process can sometimes be long. It is better to choose a tenant carefully and slowly, then to regret it later on.

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