If you're considering buying a rental property, you're onto something. High rental demand in and around Denver has created a landlord friendly market, just waiting for cashflow savvy investors. With these 10 simple steps to buying a rental property, you're on your way to cashing-in passive income.
1. Find a Neighborhood Close to the Action (But Not Necessarily in the Heart of it)
You don't want to pay top dollar for a rental property and home price is all about location. In order to capitalize on the business of an urban hub while keeping purchase cost low, look just outside the citycenterand avoid high pricedneighborhoods.
2. Consider Buying a Rental Property Without All the Bells and Whistles
Rent prices tend to remain pretty static, regardless of furnishings or brand-name appliances. A clean, properly functioning dwelling will do. Anicer property in a nicer neighborhood is likely to provide a smaller cashflow - the slightly higher rent typically doesn't justify the larger purchase price.
3. Look Into HOAs
Don't overlook HOA fees. Of course, the higher your HOA fee, the lower cash return you'll see. Anything under $250 per month can typically be considered reasonable.
4. Test the Neighborhood Out By Taking a Walk
Become an expert on the neighborhood you've selected! Take a stroll through the neighborhood one evening. Not only will you be able to make an informed decision as to whether to purchase this property, you'll also be able to paint the picture of a life at your rental property to prospective renters.
5. Check with Zillow's Rent Estimator
Rent price will be one of the most important factors in your cashflow outcome. Zillow's rental tool provides suggested monthly rent for the exact address you're considering. When buying a rental property, you'll want to be accurate when predicting the rent you'll be able to charge.
6. Compare Numbers To Be Sure You'll Make a Profit
In order to determine whether this is a smart investment for you, compare your estimated rent against your forecasted mortgage rate. Factor 5% vacancy (to calculate for months with no renters) and another 5% for repairs against profit. If you're still in the black, this could be the rental property for you!
7. Don't Forgo Inspections
Skipping inspections can cost you big time. Even if you get a great deal on your rental property, underlying issues and costly repairs could topple your cashflow. A sewer scope can be especially helpful if you're looking at an attached property.
8. Be Prepared To Pay For Quality
Properties suited for rent are in high demand. Don't shy away if you end up having to pay above ask just be sure your final purchase price jives with your profit calculations.
9. No Down Payment? No Problem!
Rental properties are solid investments, and you can get into the game without saving for a down payment. Strapped for cash? Consider a private loan or a secured line of credit.
10. Cash In!
Buying a rental can be the money-making venture you've been searching for. Consult your tax and finanical advisors to run thenumbers before you buy, then start making a return on your investment!
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