After speaking to the other parents at the bus stop or other members of the gym, you finally think you may look into buying a rental property with the extra savings you have accumulated after your annual bonus or paying off your car. There are very basic things you should know when you make the decision to start looking into real estate as a vehicle to make a passive income.
Step one is something you have heard a thousand times. Do your homework! Learn about your market. See what’s going on in the neighborhoods in your area. Realtor.com or a trusted realtor in your town may be a great resource to turn to. Demand and price go hand in hand. Look at trends. If a particular area has faster growth in the prices, then it may rent faster as well, because of its desirability. Look for features that may drive the demand for a region like new traffic patterns, new construction, new schools, etc. Remember that governments typically invest resources, namely infrastructure, because they have spent a lot of time and money to research the benefits.
That leads to the next item on the checklist, TAXES. After you determine a suitable area to make a potential purchase, you should be aware of the applicable city and governing taxes. Make sure that plays into your decision. After looking at comparable rent rolls for two homes, you ascertain that one home will probably rent for $100-$200 more, but it carries a higher real estate tax bill of nearly $3,500 more. With more facts that you incorporate in your decision making process, you will be able to make a better decision that will grow your bottom line. The county or city tax assessor’s office can be a great place to start.
If you are a first time investor or a seasoned expert, it is decisive that you have a strong team. A team consists of a knowledgeable real estate broker, a responsive lender, an accommodating settlement agent or real estate attorney, an experienced home inspector, a reasonable insurance agent, and a trusted property management firm that can tie everything together for you.