With demand for Colorado rentals skyrocketing in the last few years, it can be tempting for a homeowner to rent out their home and live somewhere cheaper. Another popular option is to buy an investment property, do some quick fixes, and rent it out. Either way, being a landlord may be more of a full time job than most people think. Before simply leaping into the role of lessor, scroll through this list of the TOP 5 THINGS TO KNOW BEFORE BECOMING A LANDLORD.
Understand Your Financial Position
This is probably the most important point since it is usually what gets first timers into trouble. Reality TV shows make house flipping or remodeling look easy and cheap when it is quite the opposite. Remember that the inexpensive little place you may be looking at is going for a low price for a reason. If it needs too much repair before you can start renting it, you may be in debt for years before the house starts paying for itself. Most often, it’s actually cheaper just to bulldoze the house and start over. Even if you don’t start from scratch, a sub-par building will have you putting the handyman on speed dial and eventually paying his kids’ college tuition. As an added bonus, if you are currently paying on your own mortgage, there will be a space of several months where you will be shelling out two monthly sets of payments until you have a reliable tenant installed.
Research Potential Tenant Base
You may have gotten lucky and spotted a beautiful home that needs little upkeep; rare but possible. Who are your tenants going to be? In a college town like Ft. Collins, you are most likely going to be inundated with applications from college kids; parties and poor maintenance. In the suburbs of Westminster or Superior, you’ll be interviewing middle to upper class families that are more likely to keep your new property looking nice.
Investigate Crime Rate
This goes hand in hand with the research on your tenant base. Are you going to be renting out a house in a high crime area where your rental is more likely to be vandalized or broken into? It will be harder to find reliable tenants, but the initial purchase price will be cheaper. Conversely, a lower crime rate area will attract a higher class of tenant but you will be shelling out more to buy the place.
Know the School Districts
Also a high consideration since your most desirable tenants will be families with children of some age and those families will be looking for good schools. They won’t want to enroll their kids in a school that’s more of a penal facility than an educational institution. Better local schools will also let you increase your asking rental price.
Estimating Future Growth Potential of the Neighborhood
In ten year’s time, what is the area going to be like. Will it be caught in one of the sweeping waves of inner city disrepair and redevelopment, or will it remain a stable community? Will your property value rise or fall as the neighborhood evolves? Remember that this is for the long haul; an investment for the decades.
Becoming a landlord often seems like an intelligent choice that will pay for itself as the years go on and the monthly checks come in, but the traps are still there for the unwary or hasty. With proper planning and smart decisions, it can be profitable. However, it’s important to do your homework on the area and local housing trends before you purchase a possible money pit.
When you want a realtor who will make you their number one priority, it’s time to contact me to set up an initial consultation. Feel free to call True Performance Real Estate today and any questions you might have about selling your home!
Call: 303-317-6311