Watch Out For These Hidden Fees When Purchasing Your First Rental Property

Watch Out for These Hidden Fees When Purchasing Your First Rental Property

If you are looking to invest in a Philadelphia rental property, being prepared beforehand is the best way to go.

This is especially true when it comes to the financial side of purchasing a rental property.

It is easy to be misled by the initial sales price of a rental property, and even more so if you are new to investing in real estate.

However, there are costly fees tacked onto the purchase price of any property you buy that need factoring into your overall budget.

This way you don’t accidentally overextend yourself before even getting started.

That’s why today we are going to break down the miscellaneous fees you can expect to see throughout the purchasing process of your Philadelphia rental property, so that you don’t go over budget, don’t have to dip into your personal savings, or don’t have to take from the rental property emergency fund you spent so long building up.

 

The Hidden Costs of Investing in Philadelphia Rental Property

1. Earnest Money

Though not technically considered a “fee,” earnest money is definitely something you will need to pay upfront after showing interest in property that’s available for purchase.

Typically 1% of the property’s purchase price, earnest money is paid as a way of proving you are genuinely interested in buying a property.

It serves to protect the seller, who will then pull their property off the market in hopes you will actually buy.

Keep in mind this is not a down payment, should you decide to purchase the property.

However, this money can be applied to your down payment total when the time comes, because it will be credited back to you during closing.

 

2. Loan Origination Fee

Loan Origination Fee is the Biggest Fee You'll Pay in Your Philly Rental Property Purchase

This is usually the biggest fee you will have to pay when it comes to finalizing your mortgage.

It is used to assist your lender in generating, or “originating,” your mortgage.

In short, your mortgage lender requires this money in exchange for preparing your mortgage for closing.

 

3. Application Fee

Sometimes your mortgage company will charge you to prepare and process your loan application.

This is money due to them for investing time and effort into your loan application process.

 

4. Credit Reporting Fee

Credit Report Fee When Purchasing Your Philly Rental Property

Just like you are sometimes required to pay for a loan application fee, you may find that your mortgage company requires you to pay for the credit report that is run on you during the loan application and approval process.

Whenever you are considered for a mortgage loan, your credit worthiness is checked – often by a third-party service – to determine whether you are a good candidate for a loan.

The processing fee associated with this credit check is passed from the third-party service to the mortgage company, and lastly, to you.

 

5. Property Appraisal

When you apply for a loan from a mortgage company to cover the cost of a rental property purchase, the mortgage company wants to make sure they are lending you money on a property that is actually worth the amount of the loan they are considering approving you for.

This is why your mortgage company will request a property appraisal.

This appraisal will help determine the fair market value of the property you are interested in so that the mortgage company can decide if they want to move forward with lending you money.

 

6. Home Inspection

Home Inspection is a Hidden Fee With Your Philly Rental Property Purchase

Though not always required, a home inspection protects you from purchasing a property riddled with problems.

A professional inspection of the property you are interested in reveals any underlying issues that even the seller may not be aware of.

This way, you can have all inspection issues handled before you commit to purchasing the property.

Keep in mind that a general home inspection will not cover all aspects of the property.

In fact, here is a list of common things in the property that will require a specialized inspection:

  • HVAC system
  • Mold
  • Foundation
  • Well Water
  • Septic System
  • Radon
  • Structural
  • Termite

If you want any of those things cleared before purchasing the property, you will need to hire a separate inspector.

 

7. Property Surveyor

The rental you are looking to buy will most likely need to be professionally surveyed to verify the physical specifications of the property.

This of course, comes at a price you have to pay.

If, by chance, a previous survey was done on the property, and nothing has changed since that survey was officially documented, you may be able to forfeit surveying the property again, which will save you some money.

 

8. Private Mortgage Insurance (PMI)

Private Mortgage Insurance is a Hidden Fee With Your Philly Rental Property

This fee is reserved for people who pay less than 20% down on the property they are buying.

It protects the interests of the mortgage company, since they are lending you a large amount of money to cover the cost of the property.

You will pay a monthly PMI fee until your loan reaches 80% of the home’s fair value market.

This is in addition to the mortgage you will have to pay each month.

 

9. Title Fees

Many fees tie into what is commonly labeled as the “Title Fees:”

  • Title Insurance. A title insurance policy insures the property against any liens or defects in the title of the property, and includes any administrative and documentation fees.
  • Title Search. A title search will reveal previous title holdings of a property.
  • Recording Fees. Any fees associated with recording the deed and other related documents with the County Recorder’s Office pass on to you.
  • Title Policies. Both the owner and mortgage title policies will be your responsibility (unless the sales contract deems otherwise), and are typically a percentage of the total sale price of the property.
  • Flood Certificate. If your property is located in an area that experiences heavy flooding, you will need a Flood Certificate designating the property as being located in a flood zone. This will also prompt you to purchase the required flood insurance.
  • Tax Certificates. These show previous property tax payments and any owed taxes. All taxes from the closing date through the end of the year are your responsibility. These taxes can be integrated into your monthly mortgage bill.
  • Documentation Fees. You pay any fees related to the Deed, Deed of Trust, and Notice of Purchaser.

As you can see, there are many fees incorporated into what are commonly referred to as “title fees.”

 

10. Home Warranty

You may want to consider investing in some home warranty coverage if the property you are looking to invest in is no longer covered under the original manufacturer’s warranties.

This will cover things like kitchen appliances, ceiling and exhaust fans, plumbing issues, the furnace, and even electrical problems.

This is typically paid for annually, and only adds to all the other fees you have to pay during the purchasing process.

 

Altogether, purchasing rental property in Philadelphia, or anywhere for that matter, is bound to cost much more than you might initially expect, thanks to these hidden property fees.

And while the fees are not hidden on purpose, for those that are inexperienced with the purchasing process, these added costs can come as quite a surprise and significantly impact your initial budget.

If you are new to the rental property industry, and are looking to invest in some rental property, consider enlisting the help of Philadelphia’s best property management company, Bay Management Group.

We have extensive knowledge of the region and can help guide you when it comes to choosing a locale for your rental property. We know how much rentals are going for, what you can expect your monthly rent rate to be, and can even help you with managing your property after purchasing it.

So, contact us today and see how we can help you with your Philadelphia rental property investments. This way, you can use our knowledge of the area to better budget for your investment and ensure there are no hidden surprises come closing time.


Finding the Perfect Real Estate Agent for Your Investment Property

 finding-perfect-real-estate-agent-investment-property-marylandFinding a reliable real estate agent is essential to anyone looking to purchase a piece of real estate. Whether you are a real estate professional looking to expand your portfolio or a casual home buyer, picking a real estate agent you can trust is a must when it comes to buying or selling homes.

But how do you go about finding the right agent for you?

The best agent for you is not always going to be the most familiar real estate name in the biz, the one who has sold the most homes in the area you are interested in or the one working for the largest brokerage. In fact, many times those things will not matter at all.

What will matter is that you find someone that acts in a professional and ethical way, is willing to listen to your needs and knows the market you are looking to enter.

Today we will take a look at what role a real estate agent plays in the home purchasing process and provide you with some helpful tips for finding the right real estate agent for you.

 

What is a Real Estate Agent?

real-estate-agent-maryland-rental-propertyReal estate agents are licensed professionals that represent buyers and sellers in real estate transactions. Many times a real estate agent will work under one of the following:

  • Real Estate Broker: A professional or firm in the real estate business that charges a fee or commission for conducting buy and sell transactions of real estate initiatives. They also handle the earnest money deposit and escrow account. A real estate agent that works under a broker is licensed to help people buy and sell property.
  • Realtor: A real estate professional that is a member of the National Association of Realtors. They are considered expert real estate agents and are more educated than your typical real estate agent.

A real estate agent’s duties will depend on whether they are representing a buyer or seller in the purchase process.

If representing the seller, a real estate agent will advise the client on how to price the property, how to prepare the property for sale and what improvements can be made to boost the value of the home. They also promote the property through things such as listing services, networking platforms and traditional advertisements via online or newspaper ads.

If representing the buyer, a real estate agent will search for available properties that match the buyer’s needs and price range and arrange for the purchase of the property.

 

How to Find the Perfect Real Estate Agent

 find-perfect-real-estate-agent-maryland-rental-propertyNow that you know what a real estate agent is responsible for, let’s look at some things that can help guide you to an agent that works best for you.

Get Referrals

Satisfied customers of exceptional real estate agents will not hesitate to refer them to family, friends and co-workers. In fact, word-of-mouth is one of the best ways to find out if meeting with a potential real estate agent is a good idea. Here are some things you should discuss with those that have had experience with a real estate agent:

  • What was the experience like from start to finish?
  • How satisfied were you at the end of the process?
  • Did the agent truly listen to your wants and needs?
  • Did the agent give you exactly what you wanted?
  • What did the agent do that exceeded you expectations?
  • How likely are you to refer them to others and why?

Visit Open Houses on Your Ownopen-house-rental-property-marylandOne way to see an agent in their element is to visit an open house in the market you are interested in. This is an informal way for you to meet the agent and get a first impression that may encourage you to pursue them as your agent.

Observe how prepared and knowledgeable the agent seems. Notice how the open house is set up (should you be in the market to sell your home) and decide if the setup is something you would want for your home. In addition, notice the energy you get from your interactions with the agent. Although not always right initially, your feelings about someone upon a first meeting are usually right.

Lastly, make sure you know who the listing agent is on the open house. Experience is a must when it comes to choosing a real estate agent. Just because an agent has attended an open house does not mean the property is theirs to sell.

 

Check Their Experience Level

The goal of finding a great real estate agent is to find someone experienced in doing deals that are similar to the one you are interested in conducting. For example, if you are looking to buy a starter home that will fit your family’s needs, finding a real estate agent that has experience only in luxury condo sales is probably not going to be a good fit.

You need an agent that understands the market, whether you are looking to buy or sell. Additionally, an experienced agent will have many connections, will know of properties that are considered off-market that may suit your taste and have the negotiation skills to help get your offers accepted.

 

Match These Qualities

There are plenty of different personalities, experience levels and success rates floating around the real estate industry that can confuse anyone when it comes to choosing a good real estate agent. Make a list of the personality traits you are looking for in an agent and look for someone that matches the majority of them prior to hiring them to help you buy or sell your property:

  • Make sure they are licensed. Being a real estate broker or Realtor is not required. However, your real estate agent’s license should be in good standing. In addition, they should have zero complaints against them. This information can easily be Googled.
  • Knowledge is key. You want to find an agent that excels in the type of real estate transaction you are interested in. Residential and commercial properties are very different. Short sales or foreclosures have their own individual issues to contend with. Buying versus selling makes all the difference.
  • Communication is also key. This seems like an obvious point but unfortunately with many real estate agents, communication is not a strong point. It is your right to know what is going on with your real estate transaction at all times. Make sure you are receiving regular updates in your preferred method (email, phone, text). Also, make sure you can easily get in touch with your agent should you have any questions or concerns.

In addition to these important qualities you want to make sure you find a real estate agent that is truthful, has integrity and performs their job with pride. Investing in a property is a big deal and is one that does not come cheap. Someone who does not understand this is not worthy of your time or money.

 

If you are looking for a real estate agent to represent you in your real estate endeavors, take note of the above-mentioned tips. They will go a long way when it comes to choosing the right agent to represent you and get you the best deal possible, no matter which side of the bargain you are on.


Is it a Good Idea to Invest in a Fixer-Upper Rental Property?

Deciding which Howard County rental property to invest in takes a lot of consideration. The purchase price, location, nearby amenities, and curb appeal are just some of the things to think about.

But have you ever considered purchasing a fixer-upper rental property?
howard-county-property-management-tips-invest-fixer-upper
People love to buy fixer-upper rental properties in Howard County and there are plenty of advantages to doing so. However, many property owners fail to weigh both the pros and cons of investing in a property that needs a little extra TLC.

Thus, today we will show you both sides of buying a fixer-upper property so you can better decide whether to take on a project home or invest in one that is move-in ready.

 

What is a Howard County Fixer-Upper?

A fixer-upper property is a property that needs some rehab before it can be leased to the high-quality tenants your Howard County property management company finds to reside in your property.

The repairs a fixer-upper might need include:

  • Light cosmetic work such as a fresh paint job or new carpet
  • Roof and wall work
  • Landscaping in both the front and back yards
  • Foundational work
  • Plumbing or electrical work

While some of this repair work may seem trivial at first, it is crucial to look at the bigger picture before making the final decision to purchase a fixer-upper.

 

Pros of Buying a Howard County Fixer-Upper Property

Discounted Prices

discounted-prices-fixer-upper-rental-property-howard-county-mdOne of the biggest advantages of purchasing a fixer-upper property is the purchase price. For those that want to get into the rental property business but cannot afford move-in ready homes or for those just looking for a great deal, a property that needs work is often a great solution.

In addition, buying a rental home at a lower purchase price, putting in some hard work to make it look great, and leasing it to high-quality tenants that will take care of your property will add value to the home over time. Called appreciation, this concept is great for those who wish to increase the monthly rent at some point. It also helps if you are planning to sell the home sometime in the future.

Less Competition

In a popular location such as Howard County, it can be tough to grab a nice, move-in ready home for a reasonable purchase price. This is especially true because many property owners don’t want to invest in fixer-uppers because they do not want to invest the time and money to make the property move-in ready.

However, by investing in a property that needs some upgrades or repair work, you avoid a lot of the competition. Even in a competitive real estate market, purchasing a rental that needs work significantly increases your chance of finding a deal.

 

Increased Positive Cash Flow

Buying a Howard County fixer-upper property at a lower purchase price than that of neighboring properties has the potential to generate more positive cash flow. For instance, buying a rental home below full value price means lower monthly mortgage payments. It also means more money in your pocket when you charge competitive monthly rent rates.

 

Property Tax and Loan Savings

Since property taxes are based on a home’s sale price, your biannual property taxes will be significantly less if you buy a fixer-upper as opposed to a move-in ready home. In addition, some fixer-uppers in Howard County will qualify for an investment tax credit for rehabilitation costs, meaning you may actually make money off the repairs you put into your fixer-upper.

Lastly, the great thing about this type of investment purchase is that you may also be able to finance the property using a 203(k) loan. This means that your loan amount can be used to purchase the property and make the improvements needed to make the property livable.

 

Cons of Buying a Howard County Fixer Upper

 

Hidden Expenses

howard-county-rental-property-fixer-upper-hidden-costsAlthough you may be able to save money on a fixer-upper thanks to a discounted purchase price, property tax savings, and even a creative financing solution such as the 203(k) loan, there are possible hidden costs you may run into once the rehab work begins.

For example, you might start remodeling your property’s kitchen cabinets and then realize your entire kitchen actually needs electrical work. Or, maybe you will discover your antique fixer-upper home is covered in lead-based paint. Maybe you’ll find rotten wood in the roof structure, mold in the bathroom, or leaking pipes in your backyard sprinkler system. In the end, this means more money, more work, and more headaches.

 

Extra Work

Buying a move-in ready house means that you have the luxury of leasing the home to Howard County tenants right away. And that is one of the reasons they cost so much more. However, if you buy a fixer-upper, whether it needs minor repairs or an entire rehabilitation, there will be lots of work involved.

Oftentimes the remodeling process can take months. Even if you only project it to take a few weeks, it is easy to fall off schedule. Dealing with unexpected problems, multiple contractors, and the reality that fixer-uppers take time to fix can be a tough pill to swallow.

 

Unexpected Costs May Outweigh the Savings

Sometimes purchasing a fixer-upper will cost you more in the long run than if you had just bought a move-in ready home. It is critical you do your research before making a final decision on a fixer-upper property. This includes listing the necessary repairs and upgrades you will be making, investigating costs associated with such repairs, and comparing that to the purchase price of a move-in ready home. Although rare, your remodel could end up costing you more than your initial savings, thus defeating the purpose of investing in a home that needs work done.

In the end, fixer-uppers pave the way for you to be creative, likely save money, and maintain a slight edge in the rental property business when it comes to positive cash flow. That being said, they are not easy to deal with and present numerous increased risks. If you are looking to buy a fixer-upper in the Howard County area, make sure you do your due diligence before making such a large investment decision.

 

In addition, if you are looking for some help managing your fixer-upper rental once it is complete, get in touch with Maryland’s finest property management company, Bay Management Group. Understanding all things property related, Bay Management has the knowledge, experience, and staff to manage your Howard County rentals so you don’t have to. Though the stress a fixer-upper may cause can only be dealt with by you, rest assured that Bay Management Group will relieve all other stresses related to your fixer-upper once it is move-in ready.


What to Consider Before Investing in a Rental Home with an HOA

Homeowners associations in America don’t have the best reputation.  They have a history of complaints of abuse, mismanagement, and wasted finances, and things don’t seem to be changing. However, there are some benefits to investing in a home that is part of an HOA.

The best thing to do is, before you invest in a rental property in the Montgomery County region, investigate whether the property is part of an HOA.  After all, as the property owner you are liable for the tenants that reside in your home and pay a monthly rent.  This means any violations of the homeowners association’s rules and regulations by your tenants may fall upon you in the form of hefty fines.

Today we will look at some of the things you should consider before investing in a property monitored by an HOA.  This way, when it comes to deciding whether an HOA is right for your property investment needs you will be better prepared to make a knowledgeable decision.

 

Common HOA Complaints from Income Property Owners

Many Complaints Arise From People Who Are Part of An HOA Homeowners Association

As mentioned earlier, there is no lack of complaints against homeowners associations across the country.  Some of the most common ones include:

  • Wasting of association funds
  • No access to official records
  • Poor communication
  • Hostility towards homeowners or tenants
  • Manipulation of elections
  • Withholding of facility or service use
  • Poor maintenance of common grounds
  • Secret meetings
  • Violation of Fair Debt Collection practices

That being said, not all HOAs are bad.  And, if you take your Montgomery County investment properties seriously and research everything before signing on the dotted line and placing tenants in your home, an HOA may actually help maintain the value of your property and thus your monthly rental rates.

 

HOA Questions To Help Guide You

Here are some of the most important things to consider before purchasing a rental property that resides in an HOA.

What Services Does the HOA Provide?

Each HOA will have its own set of specific services it provides your community, though there are some general things every quality HOA should offer.  These basics include:

  • Administration services
  • Financial services
  • Customer service
  • Communication
  • Maintenance

It is a good idea to get a detailed list of everything the HOA says it is responsible for before buying a property.  You might also consider questioning the HOA’s level of involvement in the community to ensure it is following through on its obligations and staying proactive.

 

What is the HOA’s Financial History Like?

Take a Look at the HOA's Financial History to See How They've Used Money in the Past

Though every HOA differs in terms of daily procedures, homebuyers are entitled to see their potential HOA’s financials to ensure the HOA is not in the red.  You can receive this document via the homebuyer or directly from the HOA.  It will likely include things such as:

  • The balance sheet
  • Yearly revenue from monthly dues
  • Reserve fund balance
  • Notice of pending lawsuits
  • Information regarding recent assessments
  • Percentage of homeowners behind on their dues

Unfortunately, reading complex documents such as an HOA’s financials can prove challenging.  You might need to have someone you trust in the finance industry to help you decode all of the numbers.

 

How Do The Common Grounds Look?

HOAs are responsible for maintaining the common area of the community.  Do not simply focus on the property you are looking to purchase.  Rather, get a look at the community as a whole.  If a neighboring yard looks disheveled, chances are the HOA is not implementing its rules and regulations as strictly as you may like.

Because first impressions are so important, it is crucial the entire community looks well groomed.  No prospective tenant will want to lease from you if the neighboring homes are not up to par on their curb appeal.  Plus, if you are paying what can sometimes be hefty monthly HOA dues, you should be sure the HOA fulfills its part of the deal and maintains the grounds.

 

What is the HOA’s Method of Communication?

Communication and Community Are Key With Homeowners Associations To Ensure Voices Are Heard

A large part of what HOAs do is communicate with the board members and community homeowners.  A reputable homeowner’s association will effectively communicate the community’s needs in a variety of ways to make sure everyone involved in the community is up to date.  This includes phone calls, emails, live chats, and even a website for homeowners to know what is going on in the neighborhood.

 

How Does the HOA Assessment Collection Work?

One of the most disliked things about HOAs is their collection of monthly assessment dues.  Often inflated, many homeowners have no clue how their monthly dues are being used to help the community.

HOA assessment money is important for the stability of the community.  It helps to pay for the common grounds all residents enjoy as well as extra activities put on by the association for the benefit of the residents.  In addition, this money also pads the reserve funds that cover the cost of any major repairs to the community.

It is the responsibility of the HOA to collect assessments from homeowners.  And, if you own a Montgomery County rental property, it is likely you are paying the monthly HOA dues as a benefit to your tenants.  As a homeowner you are entitled to know that the community’s money is being put to good use and is used responsibly.  In fact, there are laws in place protecting residents from shady HOAs that use the assessment money poorly.

You should learn before making a property purchase how the HOA handles its finances and do your best to ensure the HOA is fulfilling its obligations to the community with that money.

 

Does the HOA Have The Following Traits?

Though it can be hard to judge the overall feel of a homeowners association without having actual experience with them, it is important you do your best before purchasing an investment property.  Try talking to the board members to get a feel for who they are and what their roles on the board entail. Or, try to converse with prospective neighbors and see how they like the neighborhood and what they think of the HOA.

Here are the most important things your future homeowners association should do for the community:

  • Respect all homeowner interests
  • Enforce the democratic process where all opinions are heard and weighed equally
  • Offer community services and amenities to all residents
  • Maintain the community’s values
  • Enforce the rules and regulations
  • Meet the financial obligations set forth in the CC&Rs
  • Conduct ethical behavior in all matters with transparency to all community residents
  • Balance the community’s needs and those of individual homeowners

 

In the end, where you plan to purchase your Montgomery County rental property is a big deal.  And, when you throw in the possibility of the property being in an HOA community, there is even more to consider.

If you are looking to purchase a rental property that has an HOA representing the community, make sure to do your research thoroughly.  You are financially obligated to an HOA once you invest in a property that has one and you want to make sure that you are happy with how the HOA conducts its business, maintains the value of your neighborhood, and enforces the rules, especially the financial ones.

In addition, if you are looking for an experienced property management company to help you manage your Montgomery County rental property, contact Bay Management Group today.  Not only can we help you with all things property related, we help manage your tenants and ensure they are following the HOA rules and regulations perfectly.  By enlisting the help of Bay Management Group, your concerns about HOA properties will disappear.


How Many Properties Should You Buy and Manage as a Montgomery County Landlord?

Rental properties are a great way to invest your money and supplement your income. This is especially true if you are investing in the Montgomery County area. With plenty of properties to choose from in a quickly-growing region with lots of appealing amenities, owning rental property in Montgomery County will provide you a steady cash flow from the start.

But how many investment properties should you commit to owning and managing? 

The answer to this question is not cut and dry. In fact, a number of factors can potentially affect how many investment properties you have in your portfolio. Thus, it is essential you evaluate your own individual situation before making a decision.

That being said, there are some general things all property owners in Montgomery County can consider when deciding the total number of rental properties they would like to purchase and manage.

 

Rental Property Questions To Ask Yourself

Investment properties provide excellent opportunities to build a passive income and fund things such as your bank account, vacations, or even retirement. However, there are several things to ask yourself before investing in every Montgomery County property you find matching your rental needs.

 

Question #1: What Are Your Big Picture Goals?

Be Sure To Know Your Goals Before Deciding How Many Montgomery County Properties You Should Invest In

Many people want to jump right into the rental property business and start making money as soon as possible. The problem is, with no long-term goals in place, it is hard to determine how many properties are needed to meet those goals. Worse yet, not having a basic plan can ruin any goals you may have for the future. After all,

“If you fail to plan, you are planning to fail” – Benjamin Franklin

 

Here are some things to figure out before choosing how many rental properties to purchase:

  • How will you be financing the first property you plan to purchase?
  • Are you looking to supplement your income and keep a full time job, earn enough money for fancy vacations, or secure enough for an early retirement?
  • How much involvement in the management of each property do you plan to invest?
  • What is your exit plan should your rental property business not yield your desired results?

 

Question #2: How Will You Finance Future Purchases?

Getting your first Montgomery County purchase under your belt is one thing; making multiple purchases down the line is an entirely new ball game. You must have a way to finance future purchases. In the end, no matter how many properties you think you should own and manage, you must have enough money in the long term to purchase successive properties.

Here are some ways to save money in an effort to increase the number of property purchases you can make:

  • Regularly evaluate your property value so you know exactly how much equity is built in
  • Research your properties and only purchase ones with positive cash flow
  • Get an interest-only loan and place the excess cash into a separate account as savings for your next purchase
  • Continue saving money just like you did for your first rental property purchase

 

Question #3: How Will You Improve Loan Approvals?

Despite how many Montgomery County properties you want to own, or how much money you want to make each month, the bank has a great deal of control over what you actually do.

Bank lenders want to minimize their risk when it comes to loaning money to investors looking to purchase multiple properties. In order to continue building your portfolio, you need to improve your serviceability and prove to the bank you will pay up each month.

Here are some great ways to convince banks you will follow through on your financial obligations:

  • Increase your income any way you can – take a job promotion or start a side business, and save, save, save
  • Invest in positive cash flow properties – banks tend to approve loans for those receiving positive cash flow each month
  • Get experienced in negotiating with lenders – present all of the reasons you will follow through on your loan obligations and why you make a good investor

 

Question #4: How Much Time Do You Have to Manage Multiple Properties?

How Much Time Do You Have to Maintain Your Multiple Montgomery County Rental Properties?

If you are like many property owners, you have a full time job in addition to your involvement in the rental property business. Owning many properties can quickly become overwhelming if you choose to manage them all on your own. And, if you overexert yourself and spread yourself too thin, chances are your career and properties (including your tenants) will suffer in the long run.

If you aim to own multiple properties, but do not have a lot of time to manage them on your own, one solution is to hire Maryland’s leading property management company, Bay Management Group. The knowledgeable staff at BMG can manage every aspect related to your rental properties. This includes things such as:

  • Vacancy advertisement
  • Tenant screening
  • Lease drafting
  • 24/7 maintenance and repair services
  • Regular property inspections
  • Legal backup
  • Strict rent collection procedures

 

In addition to employing the help of an experienced property management company such as Bay Management Group, you might consider partnering up with someone so that some of the tasks related to your properties are split. In addition, the finances and experience of a well-balanced partner can make your rental property business that much more successful.

 

In the end, the answer to the question regarding how many properties you should own and manage is this: as many as you want, as long as you are willing and able to work for it.

Everyone’s situation will differ and pose challenges along the way when it comes to purchasing multiple rental properties. However, none of these difficulties can prevent you from achieving your goals as long as you educate yourself in the rental property business, have clear goals in mind, and have a plan before jumping right in.

Additionally, you can enlist the help of Bay Management Group to take a lot of the stress of owning multiple rental properties away and make matters even easier to handle.

 

If you are looking to boost your Montgomery County portfolio and add more properties to increase your income, contact Bay Management Group today and see how we can help you manage your multiple rental properties, leaving you room for the fun things in life.

 

 

 


Dealing with a Tough Homeowners Association for Your Rental Property

 

What To Do if You Own Property in an HOA (homeowners association) That Is Tough To Deal WithHomeowners associations (HOAs) are gaining popularity all across the state of Maryland and property owners are flocking to purchase property that is part of an HOA.  Take a look at this list to get an idea of just how many HOAs there are in existence right now, with additions consistently being made.

So why the increase in HOAs?

Homeowners associations appeal to many property owners because their aim is to maintain property values, serve the best interests of those in the community, and keep some order amongst a diverse group of people.  And, as a property owner that leases a home, these are great benefits.

You want your home to maintain value.  You want your tenants to have their best interests served.  And of course, you want a peaceful neighborhood so your tenants want to stay.

 

However, HOAs have a reputation for being difficult to deal with.  And unfortunately, this difficulty trickles down to property owners, their property managers, and even their tenants.

Thankfully, we have some great tips for handling a tough HOA that you and your tenants can take advantage of to ensure the best possible leasing experience.  In addition, if you employ Montgomery County’s leading property managers to care for your property and tenants, these tips can pass from manager to tenant easily during the move-in period.

Today we will look at what exactly a homeowners association is and how best to handle one if they are tougher than the norm.

 

What is a Homeowners Association?

A homeowners association, or HOA, is a legal entity created to manage and maintain the common areas of a community.  These common areas include places such as pools, clubhouses, landscaping areas, parks, streets, and roads.

And, as mentioned earlier, they are quite popular.  As of 2012, nearly 60 million Americans live in a community that is regulated by a homeowners association.

HOAs are typically established in communities that include condominiums, single-family homes, or townhouses.  And, as the leaders of the community, HOAs provide rules, called the “Declaration of Covenants, Conditions, and Restrictions” (CC&Rs), regarding what can and cannot occur within the common areas of the community.

Here are some of the key traits of a typical HOA:

  • They are usually non-profit corporations
  • They have the authority to enforce the bylaws within the CC&Rs
  • Membership of the HOA is mandatory for all those living within the community
  • Mandatory dues are collected monthly from property owners
  • There is an elected board of members, most of which are volunteer homeowners of the community
  • Many HOAs hire a property management company to conduct things such as maintenance, bookkeeping, and dues collection

 

In addition, HOAs provide services such as maintenance of common area landscaping, neighborhood security, activity organization for residents, and approvals for exterior home improvements property owners want to make.

 

How to Handle Strict HOA Rules

The Do's and Don'ts of How To Deal With a Tough Homeowner's Association (HOA) in Montgomery County, Maryland

All HOAs expect residents, whether owners or tenants, to abide by the community’s CC&Rs.  However, as a Montgomery County rental property owner, it is your responsibility, or that of your property manager, to ensure your tenants follow the HOA’s regulations.  In fact, here are some things most HOAs will want property owners to provide any tenant that leases their home:

  • A copy of the HOA’s CC&Rs
  • HOA rules and regulations must be a condition in all lease agreements
  • Property owners or their property managers will be held responsible for tenant violations
  • Tenants must communicate with HOAs via the property management company
  • Multiple tenant violations can lead to termination of residency

As you can see, there is a lot of responsibility that falls onto property owners and their property managers when leasing a home that is a part of an HOA.

Here are some ways you can lessen that burden and ensure a smooth tenancy that satisfies both your community’s HOA board members and your tenants.

Know Your HOA Bylaws . . .

. . . and follow them.  It is a good idea as a property owner to read your HOA’s CC&Rs thoroughly.  Your Montgomery County property manager should do the same.  This prevents any unusual violations, such as parking in your driveway, from occurring.  After all, violations result in fines and possibly termination of your tenant’s stay.

Communicate with Your Neighbors

One of the benefits of owning property within an HOA community is that all of your neighbors are in the same HOA as well.  Everyone is following the same rules set forth by the HOA and everyone pays the same monthly dues.

In the case your HOA begins enforcing rules that you feel are unnecessary, or hiking monthly dues beyond that of what is reasonable, reaching out to neighbors you already know to voice your frustrations will be a lot easier.  Plus, you can all band together and make a common complaint against the HOA board.

 

Get Approval for All Changes

Yes, this can be tedious, and often seems unfair.  However, living in an HOA means you must have approval for all exterior changes to your home and landscaping, backyard included.

To make things easier with a tough HOA that enforces every single bylaw perfectly, just get approval first.

Getting approval will protect you from fines, complaints from neighbors, and legal trouble.  In addition, it is important that your property manager enforce this with your tenants as well.

Make sure your tenants are aware they cannot make any changes, even small ones such as adding a pet fence in their backyard, without gaining prior approval.

 

Pay Your Dues on Time

To Avoid Issues, Be Sure to Pay Your HOA (Homeowner's Association) Dues On Time

This seems obvious, but a quick way to get on the wrong side of a tough HOA is not paying your dues.  If you refuse to pay your HOA dues, or even just fall behind, your HOA may have the power to foreclose on your home.  Chances are very slim that late dues would result in the foreclosure of your home, but that hefty price for falling behind on dues is not worth the risk.

 

If You Get Fined, Pay Up

Maybe you have fallen victim to the toughest HOA in the country.  As unfortunate as that is, if you receive a fine and the HOA acted within their power to impose such a fine, the best option is to pay the fine.

However, there are three additional options for dealing with an HOA fine if you adamantly believe you shouldn’t have to pay it:

  • Ask for a variance. This means you or your property manager are requesting the HOA make an exception to the bylaw violation.  If the HOA does not initially agree, they may hold a hearing where other homeowners can come to hear your case and make a decision.
  • Take legal action. If the HOA was in violation of their power, with the help of your property management company, you can file a lawsuit against your HOA in response.
  • Don’t Pay. Although not recommended, you can refuse to pay the fine.  However, if you are dealing with a tough HOA, risking additional fines and a possible foreclosure is simply not worth it.

 

In the end, dealing with an HOA can be difficult at times. However, there are some wonderful benefits in owning property in a Montgomery County HOA that you may feel are worth the potential extra hassle.

If you are looking to take some of the work off your shoulders, and the stress of dealing with a tough HOA does not sit well with you, contact Bay Management Group today.  Working solely in property management and ready to take on the task of managing your property, tenants, and tough HOA, BMG will assure you peace of mind.

Bay Management Group is knowledgeable about how to draft solid lease agreements that include HOA regulation compliance and will protect you should any legal issues arise.

In addition, we are exceptional at taking care of tenant screening and placement, maintenance issues, rent collection, and everything in between that involves your property and tenants.

So, contact us today and start handling that tough HOA in a proactive and beneficial way.


The Benefits of Investing in a Foreclosure

montgomery-county-md-foreclosure-rental-property-investmentFor many people, investing in a rental property in Montgomery County will be one of the largest, and most stressful, purchasing decisions made to date.

Finding an ideal property on the market, in the right neighborhood, with enough amenities to appeal to prospective tenants, and of course funding the down payment, just scratches the surface of what goes into investing in rental homes.

 

But what if I told you there was a way to ease a bit of your down payment funding stress by reducing the cost of home buying?

 

Oftentimes the word “foreclosure” conjures up negative feelings, especially for those who are looking to purchase a home.  Horror stories of ripped out plumbing and filthy interiors scare even the most frugal of homebuyers from considering a foreclosed home investment.

However, the truth is, investing in a foreclosure offers some wonderful and unique buying opportunities.  Moreover, if you take the proper precautions, you can actually grab a deal on your next investment property and be well on your way to a positive cash flow via your foreclosure investment.

And, once your Montgomery County property manager places a highly qualified tenant in the residence, the money investment will really start paying off.

 

Today we will look at some of the often overlooked benefits of investing in a foreclosure in Montgomery County so that the next time you are in the market to purchase a rental property, you might just consider investing in a foreclosed home.

 

What is a Foreclosure?

What is a Foreclosure?A foreclosure is a legal process in which the lender (typically a bank) attempts to retrieve the balance of a loan they had previously issued to a homeowner who is no longer making payments on their mortgage.  In a foreclosure, the lender can also claim possession of the property since the homeowner, or borrower, is no longer fulfilling their financial obligations.

There are many reasons a homeowner goes into foreclosure on their property:

  • Unexpected job loss
  • Inability to work due to medical conditions
  • Excessive debt and mounting bills
  • Divorce or other family problems
  • Job transfers
  • Market crashes in which the property’s value plummets far below what is owed (also known as an “underwater mortgage”)

 

During a foreclosure, the lender has several options to resolve the issue of non-payment:

  • Revise the payment schedule to make the house more affordable to the homeowner
  • Put the home up for public auction
  • Take legal ownership of the home in hopes of selling it privately

 

In the end, a foreclosure is actually a complicated process that seeks to protect both lenders and homeowners.

The process usually occurs in many distinct stages depending on how the loan was originally structured and what the individual circumstances surrounding the foreclosure are.

In fact, most foreclosures take months to fully resolve and will largely depend on how the borrower decides to react to the initiation of foreclosure proceedings.

 

The Pluses of Montgomery County Foreclosures

Despite the problems some foreclosures create when it comes to purchasing one to add to your rental property portfolio, there are plenty of benefits that you can capitalize on if you do your due diligence before buying.

 

Discounted Price

Foreclosed Homes Typically Have Reduced Prices to Get Rid of PropertyMany times a foreclosure’s sale price will be marked down significantly from other properties in the same neighborhood.

And, since foreclosures are not limited to poor neighborhoods with no nearby amenities, chances are you will be able to find a great rental property in Montgomery County that will have great appeal to potential tenants.  All you have to do is a little research.

In the end, opening up your eyes to foreclosures makes properties that might otherwise be unavailable to you now available, and at a considerable discount.

 

Increased Bargaining Power

In addition to coming in at much lower prices than value market prices, homes that have been in foreclosure for a long period of time are sometimes easier to grab at even lower prices with a little bit of bargaining.

Homes that are in foreclosure hurt lenders—they are not receiving any of the money they agreed to loan to the borrower during a foreclosure and as a result, the lenders suffer financially.  Lenders want to get rid of foreclosed homes quickly so that they can begin receiving money again.

Using this knowledge to your advantage, you may be able to provide a seriously low offer to a lender.  You never know—they might consider your “lowball offer” just to get rid of a property that has been sitting on the market for a long time.

 

Quick Buying Process

Lenders are looking to sell foreclosures as quickly as possible so they can recoup as much lost profit as possible.

This means closing deals tend to happen quickly.

The lender, acting as the seller, will have no reason to back out last minute, making you a proud property owner once the papers are processed.  Then you can hire your trusted Montgomery County property management company and get a tenant placed in the property as soon as possible.

And what does this quick buying process mean for you?

With this faster buying process, monthly rents will start coming in faster than if you purchased a property the traditional way, giving you the financial freedom to potentially invest in additional properties.

 

Lower Down Payment

Typically, lenders will accept lower down payments from investors on foreclosures.  This gives first-time rental property investors a great opportunity to get started in the rental property business with a property that is more valuable, and without having to come up with such a hefty down payment.

One important reason lenders tend to consider lower down payments when trying to sell off a foreclosed property is because investors demand it.  Since foreclosed homes usually have lower interest rates, those investing in them want to have a matching lower down payment requirement as well.

 

Value Building

If you invest in a foreclosure at a significantly lower price than other similar properties in the neighborhood, and the values of those homes increase as a whole, your buyer’s percentage increase will be greater than even your next-door neighbor’s.

In addition, buying a foreclosure “as is” means you have a great opportunity to upgrade and renovate the property as you see fit.  These improvements will skyrocket your property’s value and demand higher monthly rent rates.

Lastly, if you decide to sell down the road, your overall profit will likely be much higher than what you originally paid for the property.

 

In the end, a foreclosed property does not have to be a deal breaker.  There are many reasons why investing in a foreclosure will work to your advantage and make you more money in the future.

If you are looking to purchase a property in Montgomery County, consider the foreclosures available in the neighborhoods that interest you.

Do some thorough research, offer a low deal to the lender, and see what happens.  And, when you have made the deal of the year on a foreclosed property, contact Bay Management Group right away to begin the process of placing a tenant in your new rental.

Experienced staff knowledgeable in advertising vacancies, screening tenants, drafting airtight lease agreements, and managing your property throughout the lease term is just some of what Bay Management Group can offer you.

Ultimately, we offer you the peace of mind that your property and tenants are well taken care of so you can enjoy other important aspects of your life.


Should You Invest in Long-Term or Short-Term Vacation Rentals?

invest-maryland-vacation-home

If you own a rental property in a prime vacation spot, you have probably questioned whether it is better to lease your home to as a short-term rental to those on traditional vacations or on more of a long-term basis.

Independent property owners and property management groups looking to lease out rental properties for varied lengths of time should consider many factors such as cash flow, property turnaround and usage, as well as maintenance, to name a few.

Today, we will look at both types of rentals to help you make the best decision for you and your rental business.

 

What is the Difference between Long and Short-Term Rentals?

When people refer to “vacation rentals,” they are typically talking about short-term rentals.  Usually leased on a weekly basis, short-term rentals are rented to those looking to stay for a small period of time and leave.  Holiday getaways, family vacations, and honeymoons are all instances where a tenant may lease your vacation property for a few weeks at a time.

On the other hand, a long-term rental is a more permanent living situation.  Long-term vacation rentals are normally for those escaping seasonal weather for 4-6 months at a time.  For instance, your tenant may take an extended “vacation” and lease your Florida during the cold Minnesota winter months.

 

Long-Term Vacation Rental Pros and Cons

pros-cons-investing-maryland-vacation-home

Leasing your vacation home long-term lends itself to many benefits:

  • More consistent cash flow since tenants are contracted to stay for months at a time.
  • Less turnover due to longer lease terms.
  • Responsibility of utility payments fall on tenants.
  • Collection of a security deposit for damages, much like with a traditional rental agreement.
  • Higher possibility your tenant will have their own furnishings due to the longer stay.

 

However, there are also some downsides to leasing your property long-term as a vacation rental:

  • Less flexibility when it comes to using your own property as a vacation getaway.
  • Poor tenant placement can affect your bottom line and cause landlord-tenant disputes.
  • Stricter landlord-tenant laws for things such as inspections and squatter situations.
  • Higher HOA fees and more restrictions because of prime location as a vacation rental, regardless of lease lengths.

 

Short-Term Vacation Rental Pros and Cons

Just like long-term vacation rentals, short-term vacation leases have many benefits:

  • Rental rates can be set drastically higher than traditional rentals, especially if the property is located in a high demand area.
  • Less maintenance and wear on your property since tenants are simply “visiting” and will not be making your property their home by redecorating.
  • More flexibility when you want to use your own home for vacations.
  • Potential tax breaks including income reporting and operating/advertising deductions.

 

On the other hand, there are some cons to consider if you are looking to rent your vacation home short-term:

  • Hidden costs such as utility payments, external grounds maintenance, furnishings, advertising, and annual fees associated with the property such as HOA fees.
  • Extreme competition with surrounding properties that can dip into your positive cash flow or leave you with an empty rental.
  • Some community restrictions such as limiting short-term rental stays to 30 days or less.
  • Constant upgrades to make your home desirable for those on vacation rather than living day-to-day.

 

Final Thoughts

In the end, whether you decide to lease your rental property long or short-term there are significant things to consider.  Things such as your financial goals, the responsibilities you are willing to take on, and your own personal preference will help dictate whether your property is suited more for the casual vacationer or the lengthy snowbird “vacationer.”

Have you used your rental property as a vacation rental?  Do you lease long-term or short-term and why?  I would love to hear all about it in the comments below!

 


5 Questions to Ask before Investing in a Vacation Rental Property

invest-prince-georges-county-md-vacation-rental

According to the National Association of Realtors, in 2015 an estimated 1.09 million vacation homes were purchased for investment reasons alone.  Representing an increase for the first time in 5 years, it might be time for you to consider investing in a Prince George’s County vacation home that you can lease to tenants looking to enjoy a long vacation.

There are many reasons why people may be drawn to leasing your rental home for vacation purposes, whether long-term or short:

  • More available space than a hotel room for large families or groups of people
  • The opportunity for longer stays at a more reasonable nightly rate
  • Extra privacy away from other vacationers
  • The livability factor – appliances, furnishings, stocked kitchen, and more
  • Avoidance of winter or summer months, depending on preferences
  • Local living (i.e. experiencing the culture a small town like Laurel provides visitors such as state parks, historical roots, art galleries, and annual festivals)

Today we will look at some of the important considerations surrounding a vacation rental investment to help you decide whether leasing a vacation home is right for you or not.

 

Top 5 Considerations before Buying Vacation Rental Properties in Maryland

1. Is It Legal?

Before investing in a rental property you plan to later lease as a vacation home, it is important you check with your state and local laws regarding short-term lease agreements.  Some zoning laws and homeowner’s associations will put minimum stay requirements on lease terms and some will even go so far as to not allow any leasing of your home to strangers.

Take the neighboring Montgomery County for instance.  As of October 29, 2014 it was made illegal for any homeowner to lease their residence for 30 days or less in all residential zones.  This means that landlords using their properties as vacation rentals or anyone using the popular Airbnb service for extra income are violating the zoning code if tenancy lasted under 30 days.  This also means they are subject to the penalties that come with those violations

Recently, there was a push for an amendment that would allow all forms of short-term rentals to be legal in Montgomery County but you must be careful before you lease your residence as a vacation rental to avoid legal trouble.

 

2. Can You Afford It?

As with every major purchase, you must balance the cost versus the return.  Since real estate is not a liquid asset, you must consider the fact that it may not sell for a profit should the need arise.

prince-georges-county-md-vacation-property-owner-financial-decisions

In addition, more so than with normal rental properties, there are associated fees to pay whether the home is being rented or not, including:

  • Utilities
  • Homeowner’s association fees
  • Property taxes
  • Insurance
  • Furnishing
  • Repairs
  • And so much more

 

3. Do You Have a Business Plan?

Leasing your Takoma Park rental property as a vacation rental takes the same amount of work that any normal rental property does.

  • Advertising of your property’s availability on a regular basis
  • Thorough tenant screening
  • A lease agreement or contract detailing the rules for occupancy
  • Collection of payment
  • Inspections and walkthroughs to ensure no damage is being done to the property
  • Appealing to tenants that want current market trends and fancy vacation homes
  • Cleaning in between tenant stays
  • Handling of bookings and dealing with cancellations

In the end, leasing your home as a rental actually becomes more work because there is far less responsibility placed on your short-term tenants.

Unlike a more permanent living situation where your home is made to feel like their own, and where certain responsibilities are clearly defined as your tenant’s duty, vacation rentals are more luxurious and casual for tenants.  Being prepared for this is a must.

 

4. Is it Protected?

Since the influx of tenants in and out of your rental property will be more than the normal rental property turnover, there is bound to be an increase in vacancies.

vacation-rentals-prince-georges-county-must-be-protected

Be sure to protect your vacant rental as you would any other property you lease.  Try to make it look as though someone is occupying the property to avoid trespassing, vandalism, and burglaries and conduct regular visits to ensure your property is safe.

 

5. Is it Vacation Ready?

Vacation rentals are supposed to come as a complete package.  It is your duty to make it feel like home rather than like a hotel so that tenants will enjoy spending their down time there and hopefully return as repeat customers each season.

Here are some great ideas for not only furnishing your property for everyday living, but for making it feel extra special for those on vacation:

  • Include daily cleaning supplies, a mop and vacuum cleaner, as well as things like replacement light bulbs.
  • Decorate – hang artwork or photography on the walls, add throw pillows to the couch, or place flowers in the kitchen. It’s the little things that will make a difference.
  • Include hangers in the closet and ensure that the dressers are free and empty. Vacationers want lots of space, especially in a vacation home.
  • Have books, magazines, and even board games for your vacationers to enjoy – it is a vacation after all!
  • Include TVs, DVD players, radios, and clocks.
  • Provide bedding and linens.
  • Consider providing local tour guide information so your tenants can visit the hotspots.
  • Take it one step further and provide a “Welcome Book” for your tenants to refer to.

In addition to making your Bowie property look nice on the inside with décor, it is crucial that you clean it from top to bottom for the next tenant regardless of how long your previous tenant stayed.

Consider hiring a cleaning service so that you don’t have to take that task on yourself.

Remember, this is not a typical rental property where you can require your tenants to thoroughly clean your home.  While a general sweep up is reasonable, don’t expect anything more than that.  You don’t clean your hotel room when you leave do you?

 

Final Thoughts

Owning a great rental property and leasing it as a vacation home can be very lucrative, but there is a lot to consider.  Just because the lease terms are shorter doesn’t mean there is any less work to do.

In fact, you may notice more work is involved due to a higher turnover rate and more landlord responsibilities.

If you are considering leasing your Prince George’s County home as a vacation rental, and need help with all aspects of managing the property, call Bay Management Group today and see how they can help.

As one of the leading property management companies in Maryland, Bay Management Group can help you with everything from screening your tenants, to drafting a lease agreement, to payment collection, and more.

Take your own vacation from property management and let Bay Management Group handle all of the challenges associated with making sure your vacationing tenants are happy.

 


I Want to Invest in Rental Properties. Where Do I Begin?

Investment Properties 101:

Learn the Basics of Owning a Rental in Prince George’s County

how-to-start-investment-property-prince-georges-county-maryland-property-managementWith all of the recent construction in Prince George’s County, the area has seen a steady increase in housing demands. Investors looking to diversify their portfolios will find a great opportunity in purchasing local real estate and turning it into rental property.

Investing in rental properties can be a valuable and realistic plan for almost anyone with a basic understanding of real estate and the capital to make it happen. The best part is that rental properties provide consistent cash flow without a large time investment. Any individual – regardless of age – can benefit from investing in rental properties, and here are some tips to help you get started.

 

How Do Investment Properties Make Me Money?

Landlords who rent out their properties make money both when tenants pay rent and whenever the properties’ value appreciates. Additionally, property owners have the ability to utilize a number of tax deductions to maximize profitability.

Successful investment property owners in Prince George’s County rely on professional property management companies to handle the day-to-day dealings of owning a rental unit – saving you time and money. A good management company will find all the tax deductions available to you and will also suggest further opportunities to help you get the most return on your investment.

 

Start at the Bank, Not by Shopping for Properties

prince-georges-county-investment-property-owner-meeting-bank-financingIt’s fun to daydream about turning certain homes or buildings into an income property that you can enjoy for years to come. Maybe you want a vacation home to earn a profit in the off-season, or you want to develop a portfolio of investment properties to build a steady stream of passive income. A great way to start your venture is by talking to a local banker.

You must assess your financial situation very carefully. Renting out a property can be very lucrative, but those who invest also need to be able to cover losses in the event that your property is vacant between tenants, or it is in need of unexpected major repairs, etc.

Research the following financial keystones before searching for the perfect property.

  • Your personal finances – You need to have at least 6 months of income set aside to cover personal and investment property expenses in the event that something does not go according to plan. Having an emergency fund offers peace of mind, and alleviates future stress.
  • The local market – Before you start looking at properties, you need to understand the local real estate market. What are average rental prices around Prince George’s County? Which neighborhoods are most lucrative and why? Those questions yield valuable information about how much you should consider paying for a home in certain areas. A local property management company would know the best areas in Maryland and should be able to give you current trends and statistics to help you make a well-informed decision.
  • Demographics and projections – Look for opportunities where they are currently, not where you wish they might be. Consider the areas in the county that are poised to skyrocket over the next few years, and cater your decisions toward the type of tenants you can expect to see in those areas.

 

You’ll also need to budget for all of the possible expenses when you invest in a rental property. The expenses above and beyond the mortgage may include, but are not limited to, the following:

  • Property taxes
  • HOA fees
  • Insurance
  • Maintenance (appliance upgrades, flooring, painting, structural inspections, pest control, etc.)
  • Utilities
  • Property management fees
  • Miscellaneous

 

Finding an Income Property in Prince George’s County

houseAfter you understand the costs associated with investment properties, you can begin to look at prices and homes in target neighborhoods throughout the county. Look deeply into each prospective area to determine the best potential for tenant desirability. Consider the following factors:

  • Neighborhoods – Spend time in each potential neighborhood. Consider proximity to common amenities and the type of individuals who live in the area. Some neighborhoods may be more family-friendly while others may cater to young professionals or college students.
  • Schools – Look at school ratings in prospective areas. Proximity to schools can be a strong deciding factor for families. Areas that have access to both private and public schools are great locations for family-focused rental properties. If you prefer to rent to young adults, consider post-secondary establishments in the area. Rental properties near technical schools, colleges, and universities can be great locations to earn a consistent profit.
  • Safety – Crime reports in a neighborhood are valuable to property owners for a couple of reasons. First, a safe neighborhood decreases the likelihood of your property being burglarized or vandalized. Second, it provides encouragement to prospective tenants who value safety when looking for a home to rent.
  • Amenities – Even if a rental property does not have every bell and whistle, a property with access to valuable amenities increases the appeal of the home. Neighborhood pools, recreational facilities, and parks are all great assets to a rental property’s success and will attract prospective tenants.

 

Other Considerations

  • Protect your personal finances – One recommendation from a seasoned rental property owner is to never invest in rental properties under your personal name. Instead, talk with a lawyer and create a partnership or other form of company to secure your personal assets. A Limited Liability Company is the most common. In the event that something goes sour, this setup ensures that your personal finances are protected.
  • Diversifying property types – In addition to residential properties, you could invest in commercial properties, multi-family properties, vacation rentals, or other ventures. The basic considerations for real estate investment remain the same across the board, but one opportunity may be more viable than others for some individuals.
  • Invest now – Contrary to popular belief, a great time to invest in rental properties is when you’re young. Young professionals who have the right cash flow can utilize an FHA (Federal Housing Administration) loan. These loans provide insurance in the event that a borrower defaults. People in their 20s and 30s can put their first home to work for them as an investment in the future. The real estate market is on an upswing, so 2015 is a great time for new property owners to start investing.

 

Investing in Property Management

If you plan on investing in multiple properties or have another job that takes up a lot of your time, consider hiring a company that specializes in property management in Prince George’s County.

Bay Management Group offers comprehensive property management services for property owners. By using an external company, property owners save time that would otherwise be tied up in the operation of a rental property.

A property management group can help market and screen potential tenants, maintain the property, collect rent, and ensure that properties remain up to code.

For rental property owners, these professional services can be invaluable over time. Taking care of rental properties on your own can turn into a full-time job, and depending on the cash flow, a property management company may be well worth the investment.