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Investing In Rental Property

videos bullet icon  Investing In Rental Property Videos

What to Consider before Buying Investment Rental Property

Rental property can be an excellent way to bring in additional money as well as
invest in an asset that is actually tangible; however, investing in rental
property does involve more than just purchasing a property and watching the
money roll in. Many people believe that the biggest hurdle they may face is
obtaining the loan; however, this may be easier than they actually think. It is
other issues which you may face along the way which should be considered before
you actually take the step of purchasing rental property.

First, always make sure you take the time to know exactly what you can afford.
Many people make the mistake of overlooking this step, assuming that the rent
will cover the mortgage payments. If you are not sure of exactly what kind of
rent you can get before you purchase a property, you could find yourself in
financial trouble later on. You should always research rental properties in
your local area to understand the going rates for similar properties. Check the
newspaper for information on going rental rates. It is also a good idea to check
with your local landlord's association for rental rate information.

In addition, you need to take into consideration expenses which may come up
along the way. Ideally, you should have a reserve fund established to tide you
over in the event you experience emergency expenses or your property is vacant
for a period of time. Before you commit to purchasing a property, make sure
that you will be able to rent the property for at least an amount that will
cover the mortgage as well as still have a sufficient amount left over to cover
insurance premiums, maintenance costs, property taxes and income taxes.

In addition, you need to give some thought and consideration to the type of
property that will best suit you. You can find rental properties in many
different sizes as well as types. Each of these different types can pull in
different rental rates as well as attract different types of renters. So,
giving thought to the property that best suits you is really an important step
which should not be overlooked.

For example, if you purchase a property that is near a college or university
you are likely going to find that most, if not all, of your tenants are college
students. While you may never have a vacancy, you may also find that you have a
continual turnover, problems collecting rent and even possible damage to the
property itself.

In addition, you should make sure you understand your responsibilities as a
landlord. Keep in mind that your obligations are typically regulated by the
state in which the property is located. Some states have very little regulation
while other states are highly regulated. If you fail to follow state regulations
you could find yourself in for quite a bit of financial as well as legal
trouble. It is always best to educate yourself ahead of time.

Finally, make sure you consider how much insurance you will need to not only
property the property in the event of damage or destruction but also to cover
all liabilities as well. One liability claim can be enough to cause serious
repercussions so this is not an issue where you want to take a short-cut.
Remember that it is your responsibility as the landlord to provide liability
insurance, not your tenant. If someone should slip and fall on your rental
property then it will be you who is responsible, not the renter.

Rental investment property truly can be an excellent investment and income
builder provided that you are prepared and understand what you should expect
from the outset. Do not be afraid to seek help where you need it, especially
from associations and from professionals such as attorneys. This is the
hallmark that can often set a successful rental property investor apart from
one who fails.

Tax Benefits Available through Investing in Rental Property

Much of the country recently has experienced a weakening in the local real
estate market. If that is the case in your local area, now may be an excellent
time to make the decision to invest in rental property. Investment real estate
provides exceptional tax benefits which can a good deal, a great deal. If you
already own a home you may be quite familiar with many of the tax benefits
offered by owning rental property. For example, by using a mortgage to purchase
rental property you very well may be able to write off your interest payments on
your taxes.

In addition, you can tape into tax benefits which you may not already be aware
of. Many rental property owners find that they can deduct a great many of the
expenses incurred in the maintenance of the property. This includes such as
items are repairs, utilities and insurance as well as much more. In the event
you make the decision to hire a rental agent or a property manager, you will
also have the benefit of writing off any fees paid for those services as well.

Depreciation deductions can also frequently be written off. In fact,
depreciation is frequently one of the best tools available to owners of rental
property due to the fact that it provides you with the opportunity to
essentially write off the largest expense associated with owning and operating
rental property-the price for the property itself excluding the land. It should
be noted that depreciation does take place over a period of time. For
residential rental property the time schedule is 27 1/2 years while commercial
property is depreciated over a period of 39 years. This means that if you paid
$150,000 for a rental property (less the value of the land), the annual
depreciation would be approximately $5,000.

You can also frequently include property improvements in your cost basis and
depreciate them over time as well. Repairs can typically be deducted during the
year in which they occurred. Not sure whether something classifies as an
improvement or repair? Keep in mind that improvements will add to the
property's value and prolong the life of the property while a repair is
intended to keep the property in good condition. It is also important to
remember; however, that landlords are not able to assign a value to their own
labor and then deduct the cost of it.

Many landlords are also able to deduct the cost of travel, whether it is
driving or flying. In the event the travel is not local, you also have the
advantage of being able to deduct such costs as hotel bills, airfare and part
of the costs of meals.

If you choose to operate a home office in order to manage your rental property,
you may also be able to deduct specific expenses such as part of your
homeowner's insurance, utilities and home mortgage interest. In order to
qualify for this tax benefit, the space assigned as your home office must serve
as the primary place of business where you handle matters regarding the
operation of your rental property. In essence, the home office area must be
used exclusively for business and not for any other purpose. You do not
necessarily have to assign an entire room as your home office; however, as long
as you can assign a part of the room that is definable as your home office.

Tips for Hiring a Property Agent

When purchasing rental property as an investment it is important to consider
hiring a rental property agent. Many people hesitate to hire a property agent
because of the cost associated with it; however, a good rental property agent
can help you to reduce a lot of the day to day work you must handle regarding
your property. The key to making this type of arrangement work for you;
however, is in knowing how to find a good agent and what to look for.

One of the main tasks which an agent handles is finding tenants for your
property. They also provide the rental agreement. In most cases, rental agents
do not provide a service which would keep your property in good condition. In
most cases, agents only respond in the event there is a complaint from the
tenant. If an agent is less than responsible; you may find yourself owed rent
and your property in shambles. Therefore, if you decide to use an agent you
need to make sure that your agent covers several critical areas.

First, they should always provide you with an assessment of the reliability of
the tenant. Not only should the agent check the references of prospective
tenants but they should also utilize other methods so they can be assured the
tenant will care for your property and pay their rent on time. Before hiring an
agent question them regarding the methods they use for this purpose.

You should also make sure that the agent will be able to handle the collection
of rent effectively. Speak with them regarding the methods they use for
collecting back rent when a tenant fails to pay their rent on time. In
addition, find out how the agent addresses the issue of bounced checks.

In addition, you should speak with prospective agents regarding how often they
will inspect the property and what they will look for when they perform those
inspections. Furthermore, find out how they will record information and provide
feedback to the tenant as well as to you. This information can be vital to
ensuring a well operated rental property.

You should also find out how payments will be passed on to you and how
frequently you will receive rental payments. Not all agents have the same
policy. Some agents will actually retain payments for a month so they can earn
the interest on the money before they pass the payments onto the landlord.

Of course, you should also find out how much the agent charges for the services
they provide. Shop around to find out whether this fee is on-target for the
service which the agent provides. If the agent is providing a good, reliable
service it can be a benefit to your and your investment property and as a
result it can be a good investment.

Be sure you ask to review any forms the agent uses, especially the rental
agreement. You should always know the terms under which your rental property
will be rented.

Keep in mind that on-site managers usually charge more; however, that cost can
often be offset by the fact that you may be able to decrease maintenance costs
by ensuring you have a well-run property.

Remember that having a good property management agent can essentially bring you
more of a profit. Perhaps one of the biggest costs you will face when operating
a rental property is the cost associated with changing tenants. When you figure
in vacancy rates, the cost is even higher. Therefore, it is obviously in your
best financial interest to keep good tenants. A competent property management
agent can help to make this a reality.

Choosing your agent carefully and ensuring that you understand exactly what the
agent provides and what they do not provide in terms of services can help to
ensure that your investment is successful and not a headache.

Tips to Avoid Pitfalls in Owning Investment Rental Property

Owning and operating investment rental property can provide a number of
important advantages. There are potential disadvantages to owning rental
property; however, you can help to minimize possible pitfalls by following
certain guidelines to protect your investment.

First, always make sure that your expectations regarding investing in rental
property are reasonable and realistic. You should always approach the
investment of rental property with the goal of achieving a positive cash flow;
however, do not expect that you will be able to buy a new vacation home within
a year.

In addition, it is important to make sure that you take the time to do your
research and ensure that you understand the rules and regulations regarding the
ownership and operation of rental property. As the owner of rental property, you
must abide by certain federal and state laws which provide specific information
regarding your liabilities and responsibilities.

Along those same lines, it is important to be certain that any lease or rental
agreements you handle are absolutely legal. If you handle a lease or rental
agreement which is not legal, you may experience a number of problems if your
tenant happens to violate terms of the lease. To be safe, it is best to have an
attorney draft your lease and rental agreements.

Before purchasing any rental property, be sure to have the property inspected
or else you may discover you are facing a set of expenses you did not
anticipate. Having the property inspected by a professional before you sign on
the dotted line will involve an expense; however, compared to the expenses you
could face by purchasing a property without an inspection, it is certainly well
worth it.

When you begin the process of renting out your property, take the time to run
credit checks and call references. These are both steps which many novice
landlords often overlook in their rush to fill their rental properties and
begin turning a profit; however, it can be detrimental. Remember that having an
empty unit is always better than rushing and having an irresponsible tenant who
may destroy your property, get behind on their rent and ultimately prove
difficult to evict.

Joining the Landlords' Association in your local area can also prove to be
helpful by putting you in connection with experienced investors and landlords.
You can also gain access to reliable contractors, inspectors and other
professionals who can make the process of operating rental property much easier.

It is also imperative that you make sure you have adequate property insurance
as well as liability insurance. Property insurance will help to protect your
investment while liability insurance will protect you in the event anything
should happen to someone while on your property.

Finally, make sure you take the time to establish an emergency fund in order to
cover expenses which may crop up unexpectedly. Remember that you are operating a
business and as such you must be prepared for those times when expenses arise.
The exact amount that you wish to contribute to your emergency fund is
ultimately up to you; however, it should be sufficient to cover typical
expenses that may arise. The general rule of thumb is to put aside 20% of the
value of your property. To make the process of establishing an emergency fund
easier, consider setting aside a certain amount of your rental receipts each
month into a special account.

Planning ahead for Maintenance and Repair Costs

One of the biggest problems for many rental property investors can be failing
to plan for maintenance issues in their budgets. While it can certainly be
quite tempting to see all income over and above the mortgage payment as profit,
this can be dangerous when something breaks and you realize you do not have a
budget to cover the cost of repairing it. The simple fact is that regardless of
how well maintained your property might be, things can and will break from time
to time so the best course of action is to plan ahead and budget for it so you
do not struggle later on.

Ideally, the best time to begin thinking about your repair and maintenance
budget is before you actually purchase the property. When you are looking at
the numbers associated with the potential investment you will need to make in
the property, it is essential that you take repairs and maintenance into
consideration. Unfortunately, many investors completely forget to allocate
funds they will need for repairs of the property and instead only take costs
associated with taxes, fees and mortgages payments into consideration.

First, you need to consider those repairs that can be foreseen relatively easy
if you are observant. For example, take into consideration the age of the roof.
Generally, by studying the condition of the roof you can usually determine when
you will need to replace it, more or less. The same is true of the home's main
systems including the air conditioning system. By taking into consideration the
natural lifespan of many of these items you can typically predict when you will
need to come up with the funds for these replacement costs.

When considering the potential repair and maintenance costs you may run into as
you shop for property, it is important to take several factors into
consideration. Property type should be one of the first factors you consider
because the type of the property can affect repair costs later on. For example,
if you purchase a brick property you certainly will not have to worry about
painting it in a few years.

The size of the property should also be taken into consideration. Smaller
properties are typically easier and less expensive to maintain than larger
properties. Larger properties are more expensive to maintain because it simply
costs more money for repair and maintenance issues such as replacing the roof,
repainting the exterior and exterior, etc.

Surprisingly, the location of the property can also play a role in how much you
need to budget for repairs as well. Take into consideration the distance of the
property from your location. If the property is located more than 30 miles from
where you are located, you are going to spend more money traveling to the
property and that can add up quickly.

Finally, consider how you plan to manage the property. Do you plan to handle
most of the maintenance work on your own or will you hire help? Hiring outside
help can be more expensive overall; however, you must also consider the amount
of time you have available for making repairs and your own skill and experience
level.

It is also important to remember that there will typically be some problems
which will come up completely unexpected and unscheduled. You will need to make
sure that you budget for these items as well so that they do not hit you too
deeply in the pocketbook. Generally, it is a good idea to plan an annual budget
of between 1% and 2% of the value of the property for repairs which may come up
unexpectedly. For example, if you have a $100,000 property you would need to
plan to spend between $1,000 and $1,500.

By planning ahead and budgeting for maintenance and repair issues you can make
sure you are prepared when these items inevitably arrive and will not be
financially surprised.

Guide to Vacation Rental Properties

While many investors who purchase rental property focus on residences intended
for year-around living, there is no denying the fact that vacation rental
properties can provide an excellent income revenue. Renting out vacation rental
properties; however, can be much different than renting out a regular residence.
There are numerous items that prospective vacation renters are looking for; so
it is worth it to take the time to ensure that your property measures up.

First, always make sure that the property you consider is in a good location.
Most people who consider renting property for their vacation have certain ideas
regarding the geographic location that they want. The setting for the property
should be relaxing and picturesque. The property should also be quite safe so
that renters will know they can enjoy their vacation in peace and security.

Seriously consider a property that is family friendly. There is an extremely
large market for family friendly properties which you can tap into. For a
property to be family friendly, the furnishings should be able to easily
accommodate children. This means that property should be sturdy and should not
include a lot of easily breakable items. Ideally, the property should be in a
location that will cater to families. Look for properties near pools with
lifeguards as well as playgrounds.

Affordable rental prices can also be a great way to ensure that your vacation
rental property is booked. A vacation rental property with a reasonable price
is always attractive to vacationers because it offers them amenities with which
no hotel is able to compete; including privacy, good views, a full kitchen and
more space in which to relax.

In addition, take the time to make sure that the property really does feel like
home. Kitchens should be well-equipped, furnishings should be comfortable and
recreational equipment should be provided.

One of the main reasons that many people choose to rent a vacation home rather
than stay in a hotel when they vacation is the fact that they want to enjoy
plenty of space. This is especially true for families with children and
extended families who vacation together. Assuring that your vacation rental
property has a spacious feel to it can help to ensure that your property is
attractive to those renters.

Keep in mind that it is becoming more and more popular for vacationers to
combine their vacation with some other event such as a wedding or family
reunion. If you want to cater to these groups, it is important to make sure
that your property can easily host groups. One key feature for these types of
rental properties is offering a reception room that can easily serve for
different functions.

You might also wish to consider making the vacation property friendly for pets.
Many owners are reluctant to do this because of the potential for property
destruction. Keep in mind; however, that there is definitely a niche market for
vacation rental properties that are pet-friendly. Most hotels do not provide
this option, so it gives your property an advantage. If this is appealing to
you, make sure the property is safely fenced. Consider installing wood floors
instead of carpeting.

To make sure that your vacation property has a wide appeal, set up Internet
access. Even while on vacation, most people want to make sure they have
Internet access. You can do this using a DSL connection, WIFI or wireless
connection.

Costs to Consider when Purchasing Rental Investment Property

The process of searching for investment rental property can be exciting;
however, before you get too excited it is important to run some preliminary
numbers to make sure you know exactly what you are facing to ensure a
successful investment.

First, you need to carefully examine potential rental income. If the property
has already served as a rental property, you need to take the time to find out
how much the property has rented for in the past and then do some research to
determine whether that amount is on target or not. In some cases, properties
may have rented for lower than they should have while in other cases a property
may be over-rented. Look at comparables in the area to make sure you know
whether the property in question is on target; otherwise you may find that the
amount you think you will be receiving in rental income is unrealistic.

Mortgage interest is another area that should be considered carefully. Make
sure you know and understand prevailing interest rates as well as the details
of your specific loan because mortgage interest is the biggest cost you will
face when purchasing investment property. First, understand that homes and
duplexes tend to have loan structures that are similar to any mortgage loan.
With a larger property; however, such as a triplex; rates tend to be higher. If
you are looking at commercial property with even more units; the matter of terms
and rates is completely different. Typically, the more money you are able to put
down on the purchase of the property, the less interest you will have to pay.

Taxes are another issue. Many people use the taxes from the year in which the
property was purchased and assume they can use these figures to estimate
expenses. This is not always the cases because taxes do not remain the same;
they typically change every year. Usually, taxes go up after a property is
purchased. This is especially true if the property was previously owner
occupied. So, it is typically a good idea to just assume that the taxes will go
up on the property after you purchase it.

One area which many people fail to take into consideration is the cost of the
property being vacant. While you would certainly hope that your property would
remain rented all the time, this simply is not realistic. There will probably
be times when your property will be vacant. Generally, you should assume that
your property will have an average 10% vacancy rate.

The cost of tenant turnover should also be taken into consideration. This is
often a big surprise to many landlords who assume they will rent out their
properties and their tenants will remain in the property for some time. Even
more of a surprise is how much it costs to prepare the property to rent out
again. Just a few of the costs include not only advertising for a new renter
but also repainting, cleaning, etc. If damage was done to the property, the
total cost of repair may not be fully covered by the security deposit you
charged.

Of course, the cost of insurance should also be taken into consideration. Keep
in mind that the insurance for investment properties is usually higher than an
owner occupied property. Make sure you obtain a quote rather than just using
the insurance cost for your own home as an estimating guide. In addition, make
sure you take into consideration not only property insurance but also liability
insurance as well.

Utility costs are another area that are frequently under-estimated. If the
property has already served as a rental property make sure you find out exactly
what the owner pays for and what the renters pay for. You should also make sure
to find out whether you will be responsible for other costs such as trash
collection.

Finally, take into consideration the costs of property management if you will
not be managing the property yourself.

Financing Options for Rental Property

Many investors are now finding that rental property can be an excellent way to
create wealth. If you are considering getting involved in rental property
investing, it is a good idea to educate yourself as much as possible. First,
you need to find out what it takes to become qualified to purchase investment
property because it is actually somewhat different than becoming qualified to
purchase a regular home.

One of the reasons for this is the fact that a significant number of investors
either walked away from properties or declared bankruptcy during the early
1990s. While you should certainly not be punished for someone else's problems,
neither do lenders want to be left holding investment properties. Therefore, it
is important to understand that the requirements for being approved for a
mortgage on rental properties are somewhat different from what you may be
accustomed to.

While a home can often be purchased with a minimum down payment, especially if
you are a first-time home buyer this is often not the case with rental
property. Many lenders require a minimum down payment of 15%.

There are many different sources you can tap into for possible financing. These
options include: 

*  Mortgage broker 
*  Local savings and loan or bank 
*  Private lender 
*  FHA; Federal Housing Association

Regardless of which option you choose, you will find that most lenders will
want to be assured that you will have a sufficient amount of rental income in
order to cover not only the mortgage payment but also other expenses such as
insurance, taxes and maintenance. Depending on the amount of income that will
be provided from the property, some lenders may require a larger down payment.

There are also different types of loans which you can use to finance the
purchase of a rental property. One option would be a residential loan. This
type of loan can be used to purchase from one to four units. The exact options
that are open to you often depend on whether the property will be owner
occupied.

Another option would be a commercial loan. This is an option when the property
is five units or more or it will be non-owner occupied. Due to the fact that it
is a commercial loan, it is often far different from a residential loan in
regards to terms and requirements. One of the main differences between a
commercial loan and a residential loan is the fact that fees and rates are
frequently higher on a commercial loan. A larger down payment is also often
required. The down payment on a commercial loan typically runs between 25% and
35%. While there are some lenders who may be willing to agree to a higher loan
to value ratio; the requirements for qualifying for such loans are usually more
stringent. The lender will also carefully examine the ability of the property to
generate a cash flow that will allow you to repay your loan. As a result, the
lender will typically examine the property to ensure it can provide an income
that will not only allow you to cover the mortgage payments and other expenses
but also provide enough of a cash flow that you will have additional income to
place into a reserve account.

Private party lending is another option for many prospective investors. One
option would be to approach the current owner about seller financing. With this
option the owner carries back the loan for a down payment and fair interest
rate. You may find that you can save lending fees with the options and may also
be able to take advantage of making a smaller down payment.

Another option would be what is known as a hard-money loan. This is a type of
short-term financing where a third-party makes a loan to assist the investor
with purchasing the property. Generally, this type of loan involves a higher
interest rate due to the fact that the buyer has poor credit or because the
property is in disrepair and requires extensive renovation.

FHA programs are frequently offered through traditional lenders. Keep in mind;
however, that FHS does not actually lend money. They do provide insurance for
lenders; offering numerous loan programs.

Regardless of which financing tool you choose, remember that there is always
the option to refinance at some later point in order to obtain a better rate
and terms.

Guide to Showing your Rental Property to Prospective Tenants

In order to succeed when you invest in rental properties it is necessary to
show your property to potential tenants. Just as if you were selling the
property, you must make sure that the property is appealing to tenants in order
to rent it out and begin collecting rental income.

First, it is important to understand that curb appeal can be just as important
to tenants as it would be to buyers. Prospective tenants are often put off by
properties which seem to be dilapidated on the exterior. In order to attract
good tenants, you need to make sure that your property is inviting and shows
the care that you have put into it. Even small rental properties can create a
good first impression.

Repair issues should always be addressed prior to showing a property to
prospective tenants. It is never a good idea to show a property which is still
in the process of being repaired or renovated. Wait until the property has been
completely fixed up before showing it.

You should also make sure the property is extremely clean. There is nothing
worse for making a bad impression on a prospective tenant than a filthy
property. Above all, be certain that the carpeting is clean. Ideally, it is
best to have the carpet professionally cleaned after one tenant departs and
before you show the property to the next prospective tenant. Be sure to allow
plenty of time for the carpet to dry before you actually show the property to
anyone. Never put off replacing worn carpet as this can cause problems in
attracting quality tenants.

Take the time to make sure you know the best points of the property before you
show it. Sit down and think about the best features of the property so that you
can easily refer to them when you show the property.

Before you actually show the property, take the time to stop by the property to
be sure that everyone is set to make a good first impression. If the temperature
outside is quite cold or hot, be sure to stop by the property to set the
temperature inside the property so that it will be comfortable. Generally, most
people will not wish to remain inside a property that is either quite hot or
cold. If the temperature is uncomfortable, there is a good chance that most
prospective tenants will not stay around long enough to see the best features
of the property.

In addition, you will need to make sure that you turn on the lights before you
show the property. This is particularly important if you are showing the
property at night. If the property is not well lit, prospective tenants may
wonder if you are trying to hide something. The few dollars you will spend on
having all of the lights on during showings will often translate into a good
investment as you are able to attract good quality tenants to your rental
property.

Do not hesitate to show off the exterior and the grounds of the property. If
there is some interesting feature outside, make sure you show it off. The key
is to give prospective tenants an idea of what it is like to actually live
there and that includes showing off the grounds as well.

Finally, make sure you are always prepared for all showings. When you show a
property, you need to make sure that you have a rental application on hand as
well as a copy of the lease you use. You also need to make sure that you have
decided on terms such as security deposit amounts, pet deposits and key
deposits.

Tips for Locating the Right Rental Property

The decision to invest in rental property is an important one. The first step
in getting started is to choose the right property which will generate a
sufficient amount of income for you while also requiring as little maintenance
and upkeep as possible.

Ideally, it is best to develop a list which you can take with you when you
begin the process of shopping around for the right rental property. This list
will help to keep you on track and focused on what you should look for as well
as what you should steer away from.

When looking for the right rental property, you will want to take several
factors into consideration.

First, you should always consider the condition of the property. Generally, it
is best to keep in mind that if you come across a property with a price that
seems too good to be true, there is usually a reason why the property is priced
so low. Many real estate investors like to point out the fact that you are able
to determine your profit when you purchase a property.

While you may not consider selling the property for some time and will instead
be renting it out, it is still important to take into consideration the cost of
any necessary renovations and repairs before you make a final decision regarding
whether you will purchase the property or not. After considering these factors,
you may find that it will actually be less expensive to purchase a property
that is in better condition, although at a higher price, than to purchase a
property with a lower price that requires extensive renovations and repairs to
get it ready to rent out.

Location is, of course, one of the essential elements of purchasing the right
rental property as well. Keep in mind that properties which are located
directly on a busy street may not be appealing to tenants who like a quiet and
peaceful neighborhood. On the other hand, a property which is located near
schools or parks will likely be more appealing to families.

It is also important to find out the history on the property and specifically
whether the property has ever been used as a rental property. This is important
due to the fact that in some cases a property can get a bad reputation. It does
not take long for word to get around and once that occurs it can be difficult
to get past it.

If the property is currently being used as a rental property, you also need to
consider whether tenants are already on the property. If that is the case then
you may need to honor the current lease with those tenants. This means that you
may not be able to raise the rent until the lease has expired. There may even be
state laws in some cases which could regulate how much you are able to raise the
rent. Obviously, this is something that should be carefully considered. While
there is the obvious advantage of already having tenants on the property, you
may find later that this is actually somewhat of a bit of a disadvantage so be
sure to carefully consider this factor.

Maintenance and repair needs of the property should also be taken into
consideration. In the event that you are not able to maintain the property or
repair it, this will translate to hiring a property manager and/or repair
person. This means extra expenses which will reduce your profits. Of course, it
also gives you some free time so you will have to weigh the advantages and
disadvantages.

Finally, consider the price of the property. You always need to make sure that
you will be able to cover not only the mortgage payment, if you have one, but
also other expenses such as taxes and insurance. In the event the property is
not occupied for a period of time, you will still need to meet all of those
expenses so be certain that you can cover them before you obligate yourself.

Tips to Being a Successful Landlord

The ultimate goal of investing in rental property is turn a profit. To make
sure that you achieve that goal it is essential that you follow several
critical guidelines.

First, always make sure that you check references. This can be a burdensome
step that many landlords overlook if they feel as though they have a good
instinct about the tenant when they meet with them. Not checking references;
however, can lead to a number of problems. You can uncover a wealth of
information about potential problems before you rent to a prospective tenant.

Always make sure that you have everything in writing. This is to protect not
only your rights but also the rights of your tenants as well. Everything from
the code of conduct you expect tenants to abide by while renting your property
to the rental application itself should be in writing.

You will find that you have better success with your rental property if you
take the time to ensure that it is both secure and clean. The grounds of the
property should be free of clear and trimmed regularly. Not only will the
property be more visually appealing but these actions will also assist you with
property liability. You will also want to take additional security measures.
Extra security may be able to lower your insurance premiums as well as provide
an incentive to quality tenants to rent your property when they know it is
secure.

If you make the decision to hire a property manager, take the time to interview
prospective candidates very carefully. Property managers can be quite helpful if
you do not have the time to tend to all of the details yourself. The wrong
property manager; however, can cause you tremendous problems. This means that
you will need to hire a thoroughly responsible and professional individual to
handle the job.

Always make sure that you obtain adequate insurance. Not only should you have
property insurance but you should also have liability insurance. One incident
is all it takes to wipe out your investment. Check with your state to determine
if any additional insurance coverage is required.

Regardless of the condition the property was in when you purchased it, there
will come a time when repairs are needed. This is part and parcel of owning
rental property. If you take too long to make repairs, not only will your
property suffer and repairs will ultimately cost more to take care of but you
will also likely lose quality tenants as well. By making sure that you handle
repairs promptly you will be able to maintain the life of your property as well
as retain good tenants.

Always make sure that you follow all applicable regulations in the renting of
your investment property. The Fair Housing Administration Act provides precise
regulations in order to prevent discrimination. If you violate those
regulations you could find yourself facing a lawsuit that is costly in terms of
time as well as money. The best course of action is to take the time to do your
homework and consult an attorney experienced in real estate matters for
guidance regarding the FHA as well as ensuring that you have the proper forms.

Finally, make sure that you do not violate the privacy of your tenants. Check
with your state's regulations to find out whether you must provide any type of
notice to your tenant before you enter the dwelling.

Following these guidelines will help you to retain quality tenants and avoid
any potential legal problems.

Tips to Avoid Problem Tenants in your Rental Property

Having the right tenants in your property can truly make a huge difference in
your ability to succeed in owning investment rental property. While problem
renters can definitely exhibit some warning signs, there are some problem
renters who are quite adept at getting past landlords. As a result, it is
important to understand that you simply cannot always rely on your first
impression of a prospective tenant in order to determine whether they will be
responsible and reliable.

There are some tips you can use; however, in order to avoid tenants which could
prove to be difficult.

First, always have prospective tenants complete a rental application. The
application should be in writing and should provide you with the information
you need to make a decision regarding renting the property. Along those lines;
however, you need to make sure that you always follow laws, such as the Fair
Housing Act. Discriminating against prospective renters is against the law and
could land you in quite a bit of trouble. You are not allowed to deny someone
the ability to rent your property based on religion, race, etc. By following
the Fair Housing Act, you can make sure that you do not violate any
discrimination laws.

Always make sure that you obtain proof of identity. This includes seeing a
photo identification from any prospective tenants that you interview. On the
rental application you have prospective tenants complete, make sure they write
down their driver license information. Make a copy of the photo ID and be
certain that you attach it to the rental application.

Many landlords make the mistake of not performing a background check. This is a
mistake that you cannot afford to make if you want to ensure that you avoid
potentially troublesome tenants. Performing a background check gives you the
opportunity to determine if there are any previous problems. For example,
running a background check can let you know if a prospective tenant has a
history of destroying property or skipping out on the rent.

Along with a background check, you should also perform a credit check. You will
need to obtain the applicant's permission in order to do this; however, you can
do this on the rental application. You will also need to obtain the applicant's
Social Security number on the application to run a credit check.

References are also essential. Make sure that you obtain the name of the
applicant's previous landlord so you can follow-up. This is because not all
landlords make a report to the authorities when there is a problem, so by
checking with the landlord directly you have a better chance of determining if
there were any problems.

In addition, ask for character references. Make sure that you take the time to
actually check with those references. If the applicant did not give you a valid
reference this is a good way to find out about it and weed out the applicant.

Finally, make sure that you include information regarding a code of conduct
with each application or lease. The code of contact should state what is
expected of the tenant and have the prospective tenant sign and date the
document. By making sure that these expectations are clearly outlined in the
beginning, you can help to avoid a number of problems.

Tips for Coping with Loud Tenants

One of the most common issues that many landlords must deal with when they have
investment rental property is music. It is not uncommon for many renters to
either play music quite loud or play an instrument. This can be disturbing to
neighbors and as a result you may receive phone calls of complaint. How you
handle these issues is quite important because it involves a fine balance of
maintaining happy renters and yet ensuring that neighbors surrounding your
property are not disturbed.

In the event that you own a multi-dwelling property this can be even more of an
important issue as other tenants in the building may not appreciate being
disturbed by loud music. If you fail to handle the issue properly they may
decide to rent elsewhere; leaving you with vacancies and that can be expensive.
Furthermore, your property may gain a bad reputation, making it difficult to
rent to future tenants as well.

When you are facing this type or problem there are actually several different
ways that you can handle the issue. First, it is imperative that you make sure
you have discussed your property rules with tenants before they actually move
in. This type of action can help to prevent problems before they even begin.

Ensure that you have included terms within your lease stating when exactly
music may be played. You should also include in your lease statements
indicating specific times when music may not be played so loudly that it can be
heard outside the individual unit. For example, you might state that music may
not be played before 8am and after 10pm. You should also make sure that these
terms include not only music but also actual musical instruments as well as
televisions.

In addition, make sure you check on your property periodically to ensure that
your tenants are not playing loud music at night or early in the morning. If
you find that they are breaking this rule, do not hesitate to let them know
that they are violating the terms of their lease. If you allow the issue to
continue unchecked you are sending the message that this behavior is acceptable
to you and later on it could be quite difficult to stop when the complaints
begin rolling in.

Sometimes, checking on a property early in the morning or late at night is not
feasible; especially if you live a good distance away. In this case, consider
asking your neighbors to advise you if your tenants disturb them with loud
music or noise. Remember that it is always best for neighbors in the area to
advise you about the problem so that you will have an opportunity to correct it
before they contact the city or the police with their complaints. This will also
assure neighbors that you are concerned about the neighborhood and maintaining a
peaceful atmosphere for everyone.

Once you have contacted your tenant verbally regarding the matter, make sure
you follow-up with a reminder in writing. This should help your tenant(s) to
understand the severity of the situation and will also provide you with the
documentation you need in the event the behavior continues and you must
consider evicting them because of it.

Ideally, the best way to handle this type of situation is to prevent it before
it ever begins. Explain to your tenants when they move in that you regard the
issue as serious and that you will check up on the property from time to time.
If you decide to rent to students, this is especially important. By making sure
that you have established a cordial relationship with your tenants early on they
will be far more likely to respect your rules and understand where the line is
drawn so they will not cross it.

Properly managing a rental property means not only providing a pleasant living
environment for your tenants but also ensuring that your rental property does
not disturb others in the neighborhood.




Tips for Handling Vacancies in your Rental Property

From time to time you will have vacancies in your investment rental property.
When that occurs, you will naturally want to rent the property as quickly as
possible so that you do not lose out on any rent money. It could even be that
when you purchase the property, it could be vacant. There could be many reasons
why it could potentially take some time to find tenants. Perhaps the location is
affecting it. Or, it could be that there are simply a number of properties for
rent in the local area. Regardless of why your property is vacant you will need
to get it rented as quickly as possible.

For every month that your property is vacant, you are losing money in revenue.
There are some things you can do to reduce the amount of time that your
property is vacant; however.

First, when your property is vacant, use that time to your advantage by making
any repairs that are necessary and handling any maintenance tasks. In addition,
you might also consider doing something to make the property more appealing such
as touching up the paint or sprucing up the yard.

You might also consider providing some type of incentive or discount in order
to get your property rented more quickly. Certainly this will cost a bit of
money but in the long run it is often less expensive to provide an incentive in
order to get your property rented more quickly than to allow it to sit vacant
for a period of time. You might think about reducing the rent or installing
something in the apartment that would be appealing to prospective tenants such
as a washer and dryer.

Make sure you making strong efforts to market your rental property but running
ads in all of the local papers and hanging up flyers at places of interest. Of
course, you should also have a For Rent sign posted on the property so that
everyone who drives by will see it and know the property is available for rent
or lease. Once again, a small amount of money spent on marketing is less
expensive than the amount of lost revenue you could incur by allowing the
property to sit vacant.

In addition, take be proactive and begin the search for tenants before your
current tenant moves out if you have reason to believe that they will be
leaving soon. It is never a good idea to wait until the last minute and then
try to fill a vacancy. You might even ask the current tenants if they know of
anyone who might be interested in renting the property. It could be quite
possible that they have friends who have visited and would jump at the chance
to rent the property once it is available.

Keep in mind; however, that as important as it is to rent your property quickly
and avoid a vacancy you also do not want to rent out the property so quickly
that you fail to conduct a thorough screening. The first time you receive an
inquiry on the property, you need to begin the screening process. Take the time
to obtain some basic preliminary information about applicants while also
providing information about your rental property.

Of course, you must abide by fair housing laws and you also must make sure you
are fair in asking the same questions of all applicants so it is a good idea to
write down your pre-qualifying questions so you can be sure that you are being
fair. If you are unsure of what you are allowed and not allowed to ask by law,
consider consulting an attorney.

Before you end the phone call with the applicant, encourage them to drive by
the property so they can see it in person and then call to make an appointment
with you to see the interior.

Tips for Avoiding Discrimination and Ensuring Fair Housing

Avoiding discrimination is imperative when you own investment rental property.
The Fair Housing Act regulates this and you could find yourself in legal
trouble if you do not adhere to these regulations.

First, you must make sure that the property is available to be shown to all
individuals who are interested in renting it. Generally, interested parties
will call to inquire about the property before they actually see it. When you
answer questions about the property you must make sure that you are providing
the same information to everyone who calls. If you venture into offering
different conditions, terms and/or information to different individuals who
call to inquire about the property, you could be liable for discrimination.
Basically, you need to make sure that you are covering all of the specifics of
the property without necessarily trying to deter applicants away from the
property based on any of the areas which are protected under the Fair Housing
Act. Areas which need to be covered when applicants call include amenities of
the property, property size, location, etc.

In addition, you need to make sure that your rental application is also
designed with fair housing standards in mind. The best way to do this is to
have an attorney review your rental application and then provide the same
documents to all prospective renters. Also, make sure that the process is the
same for everyone. Ultimately, when you deny or accept a rental application
your decision should be based on valid requirements and not personal opinions.

Beyond the application, you will also need to give some thought to occupancy
restrictions for your property. It is not uncommon for many people to restrict
the number of people who are allowed to live in their rental unit. There can be
many different justifications for occupancy restrictions and standards. When
establishing occupancy restrictions and standards; however, you need to be
certain that your standards are fair and do not effectively discriminate
against families with children. This is one of the more common complaints filed
as many prospective tenants feel as though an overly restrictive standard
regarding maximum occupancy discriminates against them and their children.

Different laws regarding occupancy standards and restricts apply in different
states. The key in most states is to ensure that you are using good reason and
common sense. For example, if you have a 1,000 square foot two bedroom home,
then it would obviously be excessive to have seven people in the home.

There are no prohibitions regarding restrictions on the number of people who
are allowed to occupy a residence under the Federal Fair Housing Act. It is
critical; however, that any restrictions which are adopted be reasonable and
apply to all occupants. You must discriminate on the basis of race, color,
national origin, family status, gender, religion or handicap.

The most common standard adopted by most property managers is two people per
bedroom. This standard is considered to be fair and reasonable by most. If;
however, the residence in question is particularly large or it could easily
accommodate more persons, it is important to keep in mind that such a policy
could be challenged and a complaint filed so it is imperative to be sure that
standards are flexible when the need calls for it based on available space
within the dwelling.

Guide to Finding the Right Investment Rental Property

Finding the right rental property is certainly one of the keys to succeeding
with investment rental property. Below is a guide to help you get started in
finding the right property that will help you to generate additional income.

First, consider whether you want to look for rental property on your own or
whether you wish to use a broker to assist you in the process. There are
certainly many advantages to working with a reputable broker when you are
looking for investment property. In many cases, brokers may know of properties
which have just come on the market and which may not have been noticed by
others yet. A broker is also usually well versed about the local neighborhood,
which can be important if you are not from that area.

Before you actually begin looking at prospective properties, make sure that you
have gone through your finances and have them in order. Ideally, you should
check your credit report several months before you plan to make a purchase in
order to be certain that there are not any inaccuracies which could prevent you
from obtaining a mortgage for the purchase of your investment property. Be sure
to check with all three credit reporting bureaus, not just one, to get a clear
picture of your credit standing. Assuring that your credit is in order can also
help you to obtain a more favorable interest rate.

It is also important to do your research about the local market so that you do
not overpay for the property you ultimately purchase. When you do purchase a
piece of investment property, you need to make sure that the deal you strike
allows sufficient room for a profit margin just in case there are times when
you do not have a full occupancy.

Carefully consider both the advantages and disadvantages of purchasing a
property that could be labeled as a fixer-upper. While you very well may be
able to purchase the property for less money than other properties, you may
very well find that you have purchased a money pit. In the event that a lot of
major repairs and renovations are required, this can equate to a large
investment of both time and money. In this case, it would be better to pay more
for a property that requires less attention.

Before you purchase any property, take the time to have it inspected. Even if
you have inspected the property on your own, you should still have a
professional go over the property to be certain that the electrical wiring
meets code, there is no lead in the paint and that overall, the property is
safe. An inspection can sometimes turn up problems which you might not notice
but which could ultimately cost thousands of dollars to correct. You will
typically be required to pay for the inspection; however, it is a wise
investment that could save you quite a bit of time and money.

Take the time as well to research the local real estate market and the
neighborhood. Check with the local police department to find out whether the
area is safe and if you will need to provide any additional security. Drop by
city hall to determine whether there are any plans for the local area that
could potentially lower the value of the property. Research the real estate
market in the area to find out the condition of prices. If prices have gone
down recently, this could be an indication that rents will also be low. On the
other hand, if home prices in the area are high, this could indicate the area
is in demand that you may be able to charger higher rents.

Finally, do not make the mistake of 'settling' for a property simply because
you are in a rush to invest in rental property. This could result in an
investment that will require you to spend more time and/or money than you
originally planned and detract from your profit margin.

Shopping for Rental Properties-Which Types to Avoid

When you are shopping around for rental investment property it should be kept
in mind that just because you find a property with a good price; that does not
necessarily mean that it will make a good rental property. There are simply
some properties which are more suitable to renting than others. This can be one
of the most common mistakes many people make when they purchase their first
rental property. By understanding which properties should be avoided, or at
least how to handle problem properties, you can be more confident of your
success.

Outdated homes are a prime example of properties which do not make the best
rentals. One of the main reasons that outdated homes do not often make good
rental properties is the fact that they are simply more prone to have things go
wrong with them. In some cases, this can turn out to be quite expensive. You
will have two choices when dealing with an outdated rental property; you can
either spend the money to update it and risk your profit or you can not update.
The latter is also quite risky as most renters, if they have a choice, will rent
a property that is updated. Renters typically expect the properties they are
renting to be safe, secure and have working systems and appliances. Some of the
main problems you may run into with outdated problems include plumbing issues,
roof leaks, cracks and settling, electrical problems and the ability to obtain
parts for appliances.

Outdated homes are not only frustrating because they tend to have systems and
appliances that break down but they can obviously be expensive in many regards.
Not only will you have to pay for the repairs but more often than not the
repairs will need to be made when you least expect it and during the least
convenient times; which usually translates to an even higher cost.

Homes with pools also do not frequently make ideal rental properties. At first,
you may see a home with a pool as an advantage which would be appealing to
prospective tenants; however, this is not always the case. Many prospective
tenants, especially if they have young children, do not want to live in a home
with a pool because of the risk factor. You should also take into consideration
the issue of liability as well as the cost of maintaining the pool.

In addition, homes that are considered to be high-maintenance may not make the
best rental properties. Consider how much time you are willing to spend each
week working on your own home, if you are a homeowner. You might find the tasks
of wedding, mowing the lawn and watering the flowers at least fulfilling if not
rewarding. The thing about tenants; however, is that they are often not willing
to perform these tasks for a home they do not own. If you have a property that
requires all of these tasks consider hiring someone to handle the yard work and
then including the price in the rent. You will be able to guarantee that the
work is done and your property does not look unkempt without having to actually
worry about it yourself.

Location is always important when it comes to real estate and that is no
different when choosing a rental property than when purchasing a home in which
you will live. Properties which are close to amenities such as shopping,
schools, worship centers and are generally considered to be in a good
neighborhood will typically make better rentals than homes that are located on
busy streets or which are not near such amenities. Therefore, it is always
important to make sure you take location in mind when choosing a rental
property because most prospective tenants will be looking for properties that
are in good locations. If there is competition on the market, a tenant will
often choose a rental that is in better location even if it means paying a bit
more in rent.

Guide to Tax Deductible Expenses

If you own rental property, it is important to make sure that you understand
possible deductions in order to improve your profit margin as much as possible.
As the owner of rental property, it is always a good idea to consult a tax
attorney or tax consultant in order to ensure that you have a good
understanding of the items which may be potentially tax deductible. Below is a
guide to some of the most common items which are frequently tax deductible for
owners of rental property.

One of the most important things which must be understood when you are
determining what you may be able to deduct is the difference between
improvements and repairs. Many owners of rental property commonly make the
mistake of believing that anything they do to their rental property is tax
deductible. This is not always the case; however. A repair is essentially
anything that you do to the property in order to keep it in good condition. As
such, it is often tax deductible for the year in which the repair is paid for.
Common examples of repairs would include repairing a broken toilet, painting,
replacing faulty light fixtures, etc.

An improvement; however, is something that you do to the property in order to
add value to it. As such, it is not usually tax deductible at the time when you
pay for them. That said; however, you may be able to recoup the cost of
improvements by depreciating the cost over the life expectancy of your
property. Common examples of improvements would include adding a garage to the
property, a new roof, etc.

Mortgage expenses are often one of the biggest and most common tax deductions
you can take when you own rental property. Of course, this is only an option if
you have a mortgage on the property. It should be noted that any expenses which
you incur in order to obtain the mortgage are not actually deductible at the
time you pay for them. Common examples would include appraisals and
commissions. Once you begin actually making the mortgage payments; however, you
will typically be able to deduct the portion of the payment that is paid toward
interest. It is always a good idea to keep very good records; however, you
should receive a Form 1098 from your mortgage company that will detail how much
you have actually paid in interest for that year.

In some cases, you may incur travel expenses in relation to caring for your
rental property. Keep in mind that travel expenses are typically only
deductible if they are incurred in order to either maintain your rental
property or to collect rent. In the event you had to travel to make
improvements to the property, these expenses are not deductible immediately.
Instead; however, you may be able to recover the cost as part of depreciating
the improvements.

It is important to keep in mind that you usually have two options when it comes
to how you can deduct travel expenses. You may choose to deduct the actual
expenses or you may choose to take the standard mileage rate.

There are also many other expenses which you may be able to deduct on your
taxes. These expenses may include insurance, lawn care, taxes, tax return
preparation fees and any losses which result from casualties such as
earthquakes, floods, thefts, hurricanes, etc.

If the rental property which you own is a condo or a cooperative, there may be
some special rules which will apply. For example, with a condo you may pay
assessments or dues which are intended to provide for the care of property
which is commonly owned. These areas would include recreational areas,
elevators, lobbies and the actual building structure itself. When renting out a
condo, you can typically deduct expenses such as repairs, taxes, interest and
depreciation; however, you cannot usually deduct any expenses which were spent
on improvements. These costs must be depreciated over the life expectancy of
the property, just as it would be when you own a single family rental property.

With a cooperative, you may be able to deduct expenses such as maintenance
fees. Capital improvements are a different matter; however. You would not
typically be able to deduct the cost of improvements and you also would not be
able to depreciate the cost. Instead, you would need to add the cost of those
improvements to a cost basis in the stock of the corporation. If this situation
applies to you, be sure to speak with a tax attorney or tax consultant.

Always make sure that you are prepared to back-up any expenses which you deduct
on your taxes. These expenses must be carefully documented and you will need to
make sure you provide documentation, including receipts.

Guide to Protecting yourself and your Rental Property

Owning rental investment property can be a satisfying and lucrative operation;
however, there are also several areas which need to be carefully heeded in
order to make sure that you are not sued and do not become liable for any
issues which may arise in connection with your property. Learning how to
protect yourself is the first step in ensuring that your investment does not
actually become a liability.

First, you must always make sure that you have adequate casualty and property
insurance as well as liability insurance. These three items are not the same
and it should always be remembered that property insurance will not typically
protect you in the event someone becomes injured on your property.

Property and casualty insurance will cover you in the event your property
suffers from losses resulting from storm, fire or some other catastrophic loss.
Liability insurance is intended to protect you if you should be found to be
responsible for someone else's losses. You may also wish to consider carrying
flood insurance if your property is in a community that participates in the
National Flood Insurance Program. Umbrella insurance, which will provide you
with additional liability insurance beyond a general liability insurance
policy, is another worthy option you may consider.

You may ask yourself under what circumstances you may need liability insurance.
There are many instances in which liability insurance could be helpful. For
example, liability insurance could protect you in the event a tenant or an
employee becomes injured on your property. Liability insurance can also protect
you in the event you are sued for discrimination by tenants.

In the event you hire someone to work on your property, it is a good idea to
ensure that all repairmen as well as contractors are able to provide their own
certificates of insurance indicating they carry both workers' compensation as
well as liability coverage.

You should also make sure you review your insurance coverage with your
insurance agent on a regular basis. Many people make the good intention of
taking out adequate insurance coverage; however, they fail to review their
policies and when disaster does strike sometime later they are surprised to
discover that they did not have sufficient coverage after all.

It is also a good idea to make sure that you have formed good working
relationships with critical professionals such as an attorney and a good tax
accountant. There are many areas of renting property which are regulated by
law. If you are not aware of your obligations under these housing laws, you
could find yourself facing legal troubles. Therefore, it is certainly a good
idea to consult an attorney to make sure you may not be breaking any fair
housing laws. It can be entirely too easy to find yourself in trouble because
you unknowingly violated one of these laws. Additionally, make sure you meet
with a professional tax accountant at least once per year to discuss your tax
obligations regarding your property and revenue.

It is also a good idea to check with your local government to determine whether
you are required to have a business license in order to operate a rental
property in the local area. While this was rather uncommon at one time, today
more and more municipalities are enacting regulations which require a business
license for each rental property.

Also, keep in mind that your property insurance policy will not cover the
belongings of your renter in the event of damage. It is usually a good idea to
make sure you let your tenants know this by putting it in writing. Many
landlords not only encourage their tenants to obtain renter's insurance but
also require it.

Finally, take proactive steps to reduce your liability by making sure that your
property is safe. Liability insurance is certainly beneficial but the best way
to ensure that you steer clear of trouble is to keep your property well
maintained.

Establishing Valid Criteria for Selecting Tenants

Establishing tenant selection criteria can be one of the most confusing areas
of operating rental property for many people. On one hand, you want to make
sure you choose the most responsible tenant possible; a tenant who will pay his
or her rent on time and one who can be relied upon not to destroy your property.
Yet, at the same time you must make sure that you abide by fair housing laws.

Before you actually begin renting out your property it is a good idea to sit
down and determine the criteria you will use to choose that best tenant.
Without guidelines you will have no choice but to rely on your instinct to
choose the best tenant and this could result in trouble if you are only relying
on your feelings to make a tenant selection. One of the worst risks you can take
is to let your own personal opinions and biases guide you in your decision
because this could open the door for a discrimination lawsuit.

First, you should always make sure that you notify prospective tenants that you
utilize a fair system to make your decision. Ideally, it is best to include this
type of statement on all rental applications. For example, you might state "Our
policy is to rent our units in compliance with federal, state and local fair
housing laws."

If you are fairly new to operating investment rental property, you may not be
cognizant of fair housing laws. Be sure to consult your state's fair housing
office to determine those guidelines which you must follow.

Beyond fair housing laws, it is important to make sure you establish criteria
that is concrete by which to judge all potential applicants.

For example, it is common to require that the applicant provide identification
that is verifiable. You may require the applicant to present a photo ID with
their application so that you can make a copy of it. This type of requirement
is valid because you may need it in the future in the event you need to
describe adult occupants of the unit. If someone co-signs the application, it
is also a good idea to obtain identification for them as well.

It is also quite valid to require information which would help you to determine
that the applicant has a sufficient income to rent ratio. If the applicant were
applying for a loan to purchase a home, the lender would require similar
information. The general rule of thumb is to identify applicants that have a
gross monthly income that is three times the amount of the rent. One way to
document this information is by requesting copies of the applicant's pay stubs
along with their application. If the applicant is self-employed, you might ask
them to provide their last tax return in addition to three months of bank
statements. If you cannot verify the applicant's income, this would be a
perfectly legitimate reason to deny their application as you have no assurance
that they would be able to pay their rent.

Many property managers and landlords also check credit ratings and scores on
applicants as well. The purpose of this is to verify the financial
responsibility of the applicant. The general guideline is to obtain a credit
report on all applicants as well as any co-signers who are over the age of 18.
Keep in mind that you will need to receive permission to run a credit report;
however, you can request this information on the rental application. Applicants
with low credit scores could be legitimately denied on the basis on being unable
to prove financial responsibility.

In addition, you should check references. Typically, you should ask all
applicants to provide the names and telephone numbers of individuals who can
verify the applicant's income sources as well as character references.

Finally, make sure you follow-up to check that the applicant has been able to
successfully rent a dwelling in the past and paid their rent on time. In the
event an applicant is unable to meet this requirement but does meet all other
requirements you may consider requiring the applicant to have a co-signer.

Guide to Inexpensive Rental Property Repairs that Won't Take a Bite out of your
Budget

There are some decided differences between fixing up your own home and a
property you plan to rent out. One of those differences is often your budget
for repairs. If you want to make a profit on your investment property, repairs
must be kept to a minimum. Since repairs are also a necessity to attracting and
maintaining quality renters, it is also important to learn how to make repairs
on a limited budget. The good news is that there are some repairs and
improvements which can be made to your property without spending a lot of money.

First, make a point to go through the house and replace all of the older and
outdated switch plates. New switch plates need not be an expensive investment.
In fact, most switch plates can be replaced for just a couple of dollars each,
at the most. You can easily replace all of the switch plates in a property for
around $20. In some areas, you may wish to go ahead and ante up for switch
plates which are slightly nicer, such as in the living room and foyer. You will
pay a couple of dollars more for brass plates; however, even at around $5 each,
that is still not much money to pay for an improvement that can really make
your rental property stand out.

Doors are another area where you can make a big difference in your rental
property without spending a ton of money. Doors are one of the first things
that a prospective renter will notice so it can really be a worthy investment
to make when you are trying to attract good renters. While you are changing out
the doors, be sure to also consider changing out the handles as well. Older door
handles can really make a place look drab. For just a few dollars, you can
easily replace those old handles with brass finished models. 'S' handles are
popular for bedroom doors and bathroom doors and only run a few dollars more.

The trim is another area where you can make a big impact for not much money.
Take a good look at the trim in your rental property. If it appears worn and
cracked, it could be time to replace it. You do not necessarily need to spring
for crown molding throughout the entire property; however, adding it to the
entryway or the living room can create a great first impression.

Another area where you might wish to focus some attention is the entryway or
foyer. Keep in mind that once prospective renters step through the front door
this is the first area they are going to see, so you want to make sure you make
a good first impression. Tiling it can be a great way to do that. For a small
foyer area measuring around 8x8 you can easily tile it for about $100.

Kitchens are one of the most important areas for most people when they view a
property for rent, especially women. While it may not be practical to replace
all of the cabinets, it can certainly help to paint them. Consider repainting
them using a semi-gloss white paint and do not forget to replace the knobs when
you are finished. Even less expensive plastic knobs can breathe new life into
older kitchen cabinets.

Security Deposit Matters

As a rental property investor, you will find it necessary to collect money on a
regular basis. Generally, your income will come from rental payments; however,
you will also need to collect a security deposit. A security deposit is used as
a type of security to ensure that the property will be maintained well during
the time of the tenant's occupancy and also that they will not leave without
paying their final rent. In the case that either of the above circumstances
should occur, you will have the security deposit to serve as a recompense for
the money you might would otherwise be out.

The exact amount of the security deposit which you collect will vary depending
on circumstances. Some states have regulations regarding the amount of money
that can be collected for a security deposit. Ideally, it is best to collect
the largest deposit allowed in order to ensure that you do not run into any
problems later on. Where allowed by law, many landlords find it beneficial to
collect a security deposit that is equal to one and a half times the regular
rent. There are some circumstances which may dictate a change in the normal
amount of the security deposit which you collect.

For example, if you allow pets and the tenant has a pet, you may decide to
collect a larger security deposits. The same would be true for other
circumstances such as if the tenant has a waterbed, does not have any
references, etc. In these cases, you may decide that it is a good idea to
collect a larger security deposit than you would normally collect to cover the
risk you are taking on; provided, of course, that you are allowed to collect a
larger security deposit under local law.

Security deposits should always be paid in full prior to the time the tenant
moves in. Keys should never be issues until a security deposit has been
received in full; otherwise you will find that the purpose of the deposit has
been defeated. It is simply not a good idea to allow tenants to pay a security
deposit in the form of several payments. If you do so, you will likely find
that it is veritably impossible to collect all of the security deposit once the
tenant has moved in.

Ideally, security deposits should not be paid with a personal check as you run
the risk that the check may not be good.

Remember that it is always important to check with and follow your state's
guidelines regarding what you must do with the security deposit after you have
received it.

Generally, it is better if you do not complicate matters by labeling the
different parts of a security deposit. In the past many landlords charged a
variety of different deposits including a key deposit, last month's rent,
cleaning deposit, etc. This can become quite confusing very quickly and
unfortunately, many landlords found that tenants still tended to move out
without paying a last month's rent because it was already paid. These types of
tenants tended to leave the unit in a terrible conditions and necessary repairs
that the deposit did not cover. You may even wish to state in your rental
agreement that the security deposit is not to be used for the last month's rent.

Notices, Disclosures and Addendums

When you invest in rental property, it is important to understand that much of
what you can do is guided by local, state and federal regulations. In many
cases, these regulations provide guidance for the disclosures which must be
made to all tenants. This is a matter of law and failure to make proper
disclosures can result in quite a bit of legal and financial trouble, so it is
always best to ensure that you have made all of the proper disclosures.

While there are some disclosures which vary from one locality to another and it
is always best to research the regulations for your own area, there are some
regulations regarding disclosures that are common in most areas.

Lead-based Disclosures

This regulation is required by the federal government. To meet this requirement
you should know when your property was built and specifically if it was built
prior to 1978. In the event that it was, you will need to provide a specific
booklet printed by the federal government regarding lead-based paint disclosure
and have the tenant(s) sign a disclosure form. The booklet is called Protect
your Family from Lead in your Home and it can be obtained from the EPA;
Environmental Protection agency.

Hazardous Materials Notice

Be sure to check with your local ordinances to determine whether this notice is
required. Essentially, it notifies tenants that a variety of materials were used
in the construction and/or improvement of the property which may contain
materials that could be hazardous or toxic.

Mold Notification

The subject of mold has become tremendously important in the last few years and
is also one that can lead to a great amount of liability for property owners.
Check with your local landlord's association for guidance regarding
notification of mold.

In some cases, the addendums which you provide to tenants may not actually have
anything to do with potentially harmful elements in the property. In some cases,
you simply may need to provide notification to tenants regarding specific rules
and regulations which you establish.

One of the most common is a roommate addendum. This type of disclosure notifies
tenants that each roommate is jointly liable for anything to do with their
rental of the property. This prevents one roommate from skipping out and you
facing a situation where the remaining roommate claims he or she is not liable.

A pet addendum is another important disclosure to consider if you are going to
allow tenants to have pets in your property. Generally, it is best if you
always have a description of the pet which the tenant will be bringing into the
property. Perhaps you based your decision on allowing the tenant to have a pet
because it seemed to be a mature, calm dog. Six months later; however, you
discover that the tenant no longer has the calm dog and has replaced it with a
puppy that is chewing up everything in sight. Making sure that you have a
description of the pet which will be allowed to be in the property is always a
good idea; otherwise, you may have no recourse since you agreed to let the
tenant have a 'pet.' There is also the matter of exercising caution regarding
certain breeds of dogs on the property. If you allow a tenant to have an
aggressive breed of dog on the property and someone is bitten, you could be
found to be liable.

Along those same lines, you may want to take a few extra steps to protect your
property if you decide to allow tenants to have a pet. For example, increase
your security deposit, just in case there are problems later on. Also, make a
point to check with previous landlords while you are performing the reference
check to determine whether the tenant has had a pet in the past and if so,
whether there were any problems or damages. Finally, you may also wish to
require tenants with pets to provide a copy of their pet's registration papers
as well as their vaccination records.

Guide to Setting Rental Rates

Setting the right rent can be one of the most difficult areas for many people
who are investing in rental property. If your property rents out in no time, it
could be an indication that you are not charging enough rent. On the other hand,
if your property seems to take a long time to rent out, it could be a clear
indication that your rent is too high. So, how do you go about setting a rental
rate that is in line with the current market?

One of the best places to start is the newspaper. It is imperative that you do
some local research to find out what kinds of prices are driving the local
market. Location is the most important factor in determining rental rates. For
example, a three bedroom, one bath home in one part of town may rent for a $750
a month while another property on the opposite side of town may only be able to
draw $500 per month. Most prospective tenants look for convenience when
searching for a rental property. They are either looking for a location that is
near their work or close to their children's schools. Neighborhoods that are
considered to be trendy or hip can also be a driving factor, as many people
like the idea of living in certain neighborhoods.

Of course, the budget of the renter will also play a role in determining how
much they are willing to pay and can pay in rent. Due to the fact that most
renters have needs that must be filled, especially in terms of space, it is
quite common for square footage to also play a role in determining rental
rates. This means that larger homes and units will typically be able to rent
for rates that are higher than smaller homes and units.

When setting rental rates; however, it is also important to keep in mind that
there is a certain point when rental rates can reach a cap. When interest rates
are low, if rental rates rise too high, renters will quickly make the connection
that it just does not make sense to rent any longer when it could be less
expensive to buy a home.

Another way to make sure that you stay updated on rental rates in your local
area is to join a local association for landlords. This is a great way to make
sure that you keep your finger on the pulse of the local rental market.
Emerging trends in the area will affect not only you but also other landlords
as well. For example, if your particular area is in an economic slump or even
an economic boom then this could have an effect on local rental rates. Make
sure you keep track of whether there have been job losses or the creation of
new jobs in your local area.

It is also important to keep in mind that basic amenities can also play a role
in determining how much rent you can charge for your unit or apartment. Some of
the basics expected by most prospective tenants include off-street parking,
washer and dryer hookups, dishwashers, etc. If these basic amenities are not
available, you may find that you need to either offer something else that would
attract prospective tenants or lower your rental rate.

Rental Property Investment Offers Numerous Advantages

More and more people are becoming interested in investing in rental property
due to the large number of advantages offered by owning rental property. One of
the largest of those advantages is the fact that when you invest in rental
property, you are able to take ownership of an asset that is tangible. Compared
to other types of investments, this is a tremendous advantage. It can be
difficult for many people to get excited about stocks and bonds; however,
gazing at a piece of rental property that you personally selected and are
maintaining can provide you with the same pride in ownership that you received
when you bought your first home. Rental property is also an income-producing
asset which can be a much appreciated inheritance for future generations.

If you have had concerns about investing your hard earned money in financial
instruments in the past but are aware that you need to invest your money in
order to grow your wealth, real estate offers the perfect solution. While the
stock market is notoriously fickle in terms of fluctuation, real estate has
historically held a strong foothold in regards to appreciation. Even with the
current softening of the housing market, investing in real estate represents an
excellent investment opportunity. To a large degree this is due to the fact that
many consumers are finding it difficult to qualify for a home mortgage loan but
still need a place to live that is comfortable and safe.

Income is another tremendous advantage of investing in rental property. While
you will need to deduct the mortgage payment if you finance the property and
any relevant expenses, a rental property is often able to produce ongoing
income for you.

The value of appreciation should not be overlooked either. Generally, such
properties improve in value over time. While appreciation can never be
guaranteed, if you take the time to choose a property in an area that is stable
then there is a very good chance that the property will continue to increase in
value as time goes by.

Rental property owners are also able to take advantage of leverage. This is
because you have the ability to purchase a rental property with funds that are
borrowed. As a result, you are able to begin taking advantage of the benefits
offered by owning rental property while only investing a percentage of the
total value of the property. In addition, since the property itself will secure
the debt you do not have to worry about using other assets to secure it.

Tax advantages are another important benefit of owning rental property. If you
obtain a mortgage on your property, you will frequently be able to deduct your
mortgage interest payments. There are also a number of other tax deductions
which can potentially be taken when you own rental property including the cost
of repairs and improvements.

The fact that you can be your own boss when you invest in rental property is a
benefit which should not be underestimated. Whether you are considering
quitting your current job to become a full-time rental property investor or you
are looking to supplement your current income, you can benefit from the fact
that there is a tremendous amount of independence to enjoy by owning and
operating rental property.






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