Understand What It Means to Be a Landlord
Investing in real estate provides three different ways to obtain a return on an investment. A return could be realized from the sale of a property, through rent collection, and through tax savings on items such as the mortgage interest. When looking to purchase a rental property, the ultimate goal is to ensure that the rental income covers the monthly mortgage, maintenance expenses, HOA fees, insurance, etc.
Secure a Rental Property in an Area with Strong Rental Demand
Communities near universities, hospitals, or schools typically generate a strong rental demand. Condominiums and townhome communities where the Home Owner Association (HOA) maintains much of the exterior are also popular. Please be sure to determine the rental restrictions of the HOA.
Consider Using a Property Management Firm
Determine if you want to manage the property on your own or hire a property management company to handle all of the tenant’s requests. Should you choose to manage the rental property on your own, you will be responsible for handling the tenant’s requests directly. You may have to complete the repairs on your own or hire a professional. If you choose to hire a property management company, the property manager will act as the primary point of contact for all of the tenant’s requests and coordinate repairs with the landlord’s approval. Property management fees may vary but typically includes one month rent for tenant placement and 10% of the monthly rent for property management.
The Numbers Must Make Sense
A good rental property is one that generates enough rental income to cover all of the property expenses and costs. It’s important to review your numbers and determine the gross rent multiplier or cap rate that works for you. Some landlords rent their units between 15% - 25% above the monthly mortgage and maintenance costs. Furthermore, it’s a good business practice to set aside 3% reserves for unexpected maintenance expenses and raise rent each year by 3% - 5%.
Screen Potential Tenants Thoroughly
If you hire a property manager or Realtor, they will handle the screening of the tenant which includes obtaining landlord references, running a credit check and looking at the criminal record. Should you pursue this endeavor on your own, there are a number of online resources to assist you with obtaining the information. Security deposits collected should be equivalent to one month’s rent and deposits should also be collected for any pet the tenant may own. The pre-occupancy walk-thru with the tenant is also important to minimize security deposit discrepancies at move out.
Understand the LandLord Laws
Two resources for rental rules are the U.S. Department of Housing and Urban Development’s Web site, and The Landlord Protection Agency. These sources include state-specific rental guidelines and standardized forms for rental agreements. An attorney or the Landlord Protection Agency also can help draft a lease and assist with evictions. A property manager will also have access to all of these resources.
Tampa’s real estate market has been very favorable when it comes to rental property opportunities. In 2012, many of my investors were able to secure at least five rental properties. Their rental portfolio continues to grow in 2013. If you are looking to buy investment properties in the Tampa Bay area, I can assist you with your investment goals. Start your investment property search today at www.gloriawalters.com.
