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Real Estate Market Means Rental Income and Property Investing

They say everything has a bright side, and you can even find one in the recent real estate collapse. With widespread foreclosures and unemployment, more Americans are renting rather than buying. Is rental property a good investment? Now that mortgage rates have dropped to a 40-year low, investment in rental properties looks like a smart bet.

Here are things to consider for rental property investing:
  • Go local. If you know the neighborhood, you’ll likely be able to avoid potential pitfalls like crime or a nearby competitive development luring renters. Do a rental property investment analysis first, then find a nearby realtor with experience in selling rental property.
  • Think about multi-unit buildings. Collecting rent from several tenants rather than one will keep the cash flowing, and single vacancies won’t be as damaging.
  • Cover yourself. Set total rent higher than your loan payments on the property, and leave yourself at least a 20% buffer to absorb repairs, vacancies and property management costs. This should be part of your rental property investment strategy.
  • Insure it. Many landlords think they can save by skipping coverage, but can’t predict tenant behavior, weather disasters, fires and other unforeseen events. Some experts recommend requiring tenants to have their own renter’s insurance, in addition. The property owner’s coverage extends to repairs and structures, and sometimes the appliances, but not the tenant’s belongings.
  • Work with a standard lease for your state from a real estate office or association, rather than a generic form lease from an office supply store or downloaded online.
  • Check for environmental compliance. Make sure your building meets the state guidelines for lead paint, asbestos, mold and indoor air quality. If it was built before 1979, there could be painted-over lead paint in the walls.
  • Hire a professional to manage the property. Unless you don’t mind a call about a faulty toilet at 2 am on a holiday weekend, pay someone else to look after the daily details. You can focus on improving the property to recoup your investment, while your property manager deals with the nitty-gritty, especially in a larger building or one requiring frequent maintenance.
  • Finally, seek out sources of support. Join an apartment association so you have resources for advice, forms and referrals about owning rental properties.
Investing in rental properties can pay off. Just because the real estate market is still in the doldrums, doesn’t mean you have to be.
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