5 things you need to know before buying a rental property
So, you want to buy a rental property? You’ve probably heard about the value of investing in property and the passive income you could be earning as a local landlord. Both of those statements are true, but there are a lot of other things to consider before you buy a rental property. United Housing supports people in becoming homeowners fully informed about the benefits and challenges – whether or not they plan on living in the house full time. In the spirit of education, here are five things you need to know about owning a rental property.
Before we get started, not all rental properties are the same. Buying a home that you will lease to a family on a mid- to long-term basis is different than purchasing a rental home that will function as a short-term or vacation rental house. For the purpose of this blog post, we’ll only be talking about long-term rental properties.
Your city may have zoning and property rules.
The best way to avoid complications regarding zoning, ordinances and other legal challenges is to check out your local rules and guidelines before you purchase a rental property. States, cities and other municipalities can create their own regulations for landlords to follow. These can range from required zoning status and limitations on the number of inhabitants you can host in your home. To make a sound investment, you need to follow these rules carefully. Stepping outside of them can create costly challenges that might negate any profits you make on the purchase. Movoto outlined some common guidelines that you should talk through with a local representative.
There are tax and income benefits.
One of the main reasons people pursue rental property ownership is the financial benefits that come along with it. If you can rent your property for more than you pay in a monthly note, you can quickly build wealth while your property appreciates in value. But, there are also some tax benefits for rental property owners. For example, some general expenses are considered deductible by the IRS, including landscaping, utilities you have to pay and general maintenance costs. Stessa outlines additional tax benefits – but don’t count your chickens before they hatch. It’s best to talk with a tax professional about potential benefits you could receive under the current tax code.
Renters have rights you must uphold.
As a property owner, you have rights. But the people you rent to also have rights that you must uphold. These rights vary by state but generally work to protect a renter’s rights to privacy and decency. Before you start listing your property, review your local regulations. There may be some upgrades you have to make for your unit to comply with the rights of renters. The state of Tennessee has a great online resource guide for landlords and tenants to refer to when determining what actions are a violation of tenant rights.
You can enroll in programs to help find tenants.
In some respects, buying the property is the easy part. Finding a reliable tenant who will respect your property can be really hard and is one of the main reasons people don’t get into the rental property business. But, there are programs that can help, like the federal government’s Housing Choice Voucher Program. Housing authorities across the country partner with local landlords to place people in rental properties, and then payment comes to you through the housing authority. This ensures you get prompt payments that are at or above fair market value.
You may need to conduct repairs before you list your property.
Few properties are picture perfect the moment you purchase them. To make a home decent and livable for your future tenants, you will probably need to make some improvements. Products like United Housing’s Home Repair Loan can help you make needed repairs at a low, fixed interest rate. These improvements can’t be cosmetic or luxury, but can help make your home compliant with local decency standards.