The current state of real estate purchases in the United States is showing that the trend to invest in rental properties is still going strong.
According to the National Association of Realtors, despite a recent dip in vacation home investments, investor sales in 2016 remained at 19%.
Buying a rental property, especially in the coveted region of Owings Mills, can be extremely lucrative. With a high livability score, plenty of entertainment and shopping, and relatively high-income residents, the chances of you scoring a high-quality tenant are good.
However, before you invest in an Owings Mills rental property, you should know a few things.
Investing in rental property can be extremely profitable, but that profit doesn’t come without its share of risks.
4 Things to Know Before Investing in an Owings Mills Rental Property
1. Whether You Can Financially Handle an Investment Property
Purchasing a rental property is no small feat.
Not only do you have to finance the funds to finalize a property purchase, you need to have enough money to continue paying for your primary residence, and all associated costs of living.
In addition, you should have extra cash on hand to take care of any repairs or upgrades your investment property will need, as well as have an emergency fund stashed away that is to be used for your rental property business only.
Here are some key property management tips to becoming financially secure, and beginning the process of investing in a rental property:
- Maintain a steady stream of income, even if your goal is to replace your 9-5 job with being a landlord
- Save for a sizeable down payment, and factor in paying the mortgage for a certain length of time until you place tenants in your property
- Lower all of your high interest debt, including credit cards and school loans
- Enlist the help of a reliable financial planner to get your affairs in order
- Have short and long term financial goals in mind, such as whether you will quit your day job, fund your retirement, or just earn extra cash on the side with your investment property
Understanding the state of your finances before investing in a rental property will prevent a lot of stress that results from an emergency happening, and finding you are strapped for cash.
2. How Much Rent You Can Expect to Garner
Before deciding to purchase the “perfect” rental property, experienced Owings Mills property managers suggest you research how much rent you can expect to ask from tenants you plan to lease your rental to.
In line with being financially stable before buying something as major as an investment property, this knowledge will help you understand what you can expect your financials to look like after you have purchased your property.
Consider the following as you conduct your research:
- The location of your property
- The local amenities you can advertise to prospective tenants
- What similar properties are asking for in terms of monthly rent rates
- The state of your property in terms of renovations and upgrades
- The demographics of the region you are investing in
Knowing all of this beforehand will give you insight into whether your purchase price is reasonable as far as positive cash flow is concerned. After all, the whole point of investing in rental property is to make money.
3. The Value of the Investment Property
There are many tips out there regarding the value of the investment for property owners looking to invest in rental property.
For example, some say that if one month’s rent is equal to or greater than 1% of the property’s value, it’s probably a good deal.
Others say that as long as the rental income is high enough to pay off the mortgage, and all property related expenses within 15 years, the property is valued at a reasonable price and you should invest in it.
However, what it all boils down to is how much income you can expect to collect each month in relation to the mortgage value.
Here are some key things to ask yourself about property value and income expectations:
- How much monthly cash flow can you expect each month?
- What can you expect to spend each month on the mortgage and expenses?
- How much in excess fees can you expect to pay out – HOA fees, insurance, utility costs you are covering, landscaping services, etc.
- If a tenant were to move out of your property, how long do you suspect you’ll have to cover the mortgage until a new tenant is placed?
Planning for the future will help you avoid costly expenses down the road.
After you determine the answers to all of the above questions, you will have a firm grasp on whether to move forward with your investment decision.
4. The Benefits of Using a Property Manager
Knowing before you invest in an Owings Mills rental property the advantages of enlisting the help of Maryland’s leading property management company is crucial to living a stress-free landlord life.
By employing an experienced, reliable property manager to handle the day-to-day tasks of managing your rental property, you will avoid the following costly mistakes:
- Paying to advertise your vacant rental on poorly trafficked sites that garner interest amongst the wrong tenant pool
- Legal issues that could cost thousands in court and attorney’s fees, as well as settlements
- Placement of low quality, problem tenants that break the rules, don’t pay on time, and damage your property
- Attempting to handle all maintenance and repair issues yourself, which could result in more costly issues, as well as a loss in personal time
- Loss of security deposit because of improper collection, documentation, or use
- High turnover rates because of a lack in communication and customer service
- Missing rent payments because of unorganized collection procedures
Having a property management company, such as Bay Management Group, handle all of your property management needs, such as vacancy advertisement, lease drafting, rent collection, and tenant screening, can help significantly reduce your chances of losing money on your investment.
In addition, at Bay Management Group, we help with things like routine inspections to ensure your property is being cared for properly, around-the-clock maintenance and repair issues, complete with our own maintenance crew and list of reliable contractors, and even eviction proceedings should the unthinkable happen and you land in court facing your tenant.
So, contact us today and see how we can help you with your Owings Mills rental property.