Looking to Invest in Rental Property? Make Sure to Learn These Things First!
Many people see the marketing opportunity in rental housing. This is especially true in our Greater Seattle area and throughout the Puget Sound region. However, sometimes wonder if they have the background or experience to get into rental housing. One of the nice things about rental housing is that if you choose to buy a property and hire a management company, there's not much for you to do. If you are planning on keeping your portfolio small, then there is an area of knowledge that isn't required either. However, most of RHAWA's 5,800 members self-manage their properties. If you are going to self-manage your rental housing business then there are a few things that you will want to learn and if your real estate investment portfolio is expanding, then there are certain skills that you will want to acquire. Let's go over some of those.
Get the Money right
Understanding a little bit about financials and how to do a basic profit and loss is essential for making sure that an investment property makes sense business wise. To understand if you can make money in any kind of market, you have to figure in all the expenses and subtract those from the potential rent (minus vacancy). There are great online tools to help you with this as well as a great RHAWA class: Buying Cash Flow Properties. In this class, you can learn how to evaluate a property, how to read the MLS, and much more about buying properties. If you already have a property (you inherited the property or you've been in the real estate investment business) then now is a time to take stock of your financial situation and make sure that your rental housing business is as efficient as it can be.
Location, Location, Location
Understanding where the property is changes everything in the real estate investment business. Renting houses in Spokane is different than Seattle or Pasco. Even within Seattle, different neighborhoods offer different opportunities. If you are looking at a new neighborhood, you might try posting on RHAWA's CONNECT member forum to see if anyone has any advice. You can also work with real estate firms who specialize in investment property. If your city has an rental inspection ordinance, you will want to look into those requirements as well.
Know your Property
If you are buying a new property (or trying to get more familiar with your property) doing your Due Diligence is essential. When buying a property make sure to see what rents are around the property (don't always trust the MLS ranking) and have the property thoroughly inspected so that you are going into the property with your eyes open to what you face with getting the property ready for rent.
How To Get and Keep Your Tenants
If you haven't taken the RHAWA class: How To Get Great Tenants, you should take that. Then, once you've absorbed that knowledge, try out Taking Care of Your Tenants. These two classes together will help you understand all the parts of getting and retaining quality tenants in your units. Creating a solid relationship with your tenants from the start is essential to reducing your time in your properties and reducing your chances of legal problems. This includes making sure all your paper work (Lease, Property Condition Report) are filled out. It's how you welcome your tenants to their new home. When the relationship has clear expectations from the beginning, the chances of it working well are increased.
Tenant Screening has several regulations within it's processes. To successfully screen tenants you have to understand fair housing laws and local regulations (especially if you are renting in Seattle). This also means you'll have to have your tenant screening criteria at the ready for potential applicants. The best way to understand how to get your criteria set and screening successfully is to work with your Tenant Screening department and take our Tenant Screening Orientation. You can also make sure of our resources on the Forms page.
Owning rental property will dramatically change how you file your taxes. Your days of easy filing with TurboTax are probably over if you own rental property. There are business expenses and depreciation schedules to consider alongside other deductions. RHAWA offers a great class: Taxes for Rental Owners. In this class, we bring in a CPA to teach you how to keep records for your taxes and how to reduce your liability.
If you are nail down these areas in your rental housing business, then you'll be well on your way to being an expert landlord and an effective property investor.