Is Buying Rental Property Right For Me?

Investment Properties – Bentonville

With the price of homes being very attractive these days it is easy to ask yourself is Buying Rental Property Right For Me?  Before you can answer that question you have to ask yourself what is it that you are trying to accomplish.  Are you looking for a long term investment to add to your financial portfolio? Or do you need the additional income that can be provided by owning rental property?

Investing in rental income property may not be as fail safe as it appears on the surface so it is very important that before you purchase a home for rental purposes you must do some research.    Explore the rental market in your area.  Are there a lot of homes available for lease?  Is it a good location? What is the average rental rate?  Look at the employment rate in the area.  What is the average income and what can the average family afford?  Finding a great bargain on a home that will lease for a high rental rate is not much of a bargain if it sits vacant for months on end because the average tenant can not afford it.  A property management company can be a very good resource for information for you.  Even if you plan to manage the rental yourself, a property manager will often work with your Realtor in determing a rental rate.

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Are you going to make any necessary repairs yourself?  An area where people often make mistakes when buying rental property is they assume that nothing major will ever need repaired.  It is important to know what your financial limits are and what you can afford if there is a major repair to be done.   Many rental property home owners are pretty handy and so the occassional leaky faucet isn’t a problem, however, sometimes repairs require a professional.

Do you have financial reserves in case of a vacancy?  Many times when buying rental property, the new landlord isn’t prepared for extended vacancies.  Be prepared that even the most attractive home may take time in finding a good tenant and you will be responsible for paying the mortgage on the property.  MSN Money recommends that you keep a reserve of at least 6 months worth of rental payments in reserve to allow for vacancies.  Speak with potential lenders or financial planners to see if you have enough assets to cover the ups and downs of investing.

Experts say low home prices and extremely low interest rates make this one of the best times to become a real estate investor.  Do your research and see if buying rental property is right for you!

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