Have you been pondering about buying a property as an investment? Buying a rental property has two benefits, first you can get the rent to pay the mortgage interest, second, if the value of the property appreciates, this can give you huge profits in future.
Before you start looking for a rental property, there are a few things you should know to be sure of what you are signing up for. Angus Reed – a real estate expert told us what problems one can face as a landlord.
Property Tax
For most states, the property tax for a primary residence is different from the property tax for rental properties. Only a homeowner can file for a homestead exemption while filing their taxes. You cannot file the exemption for the property you’ve bought as a rental or investment property.
It is worth mentioning here that the amount of property tax will change from year to year, this is because it depends on the value of the property. There can be an increase or decrease in the value of the property each year which will be reflected on your property tax.
Insurance cover for rental properties
Many first-time rental property owners might not know this, but rental properties require a special insurance policy. You must switch the insurance plan because your insurance company might deny a claim on your rental property if you didn’t have this policy.
A landlord insurance policy covers the structure, your belongings, losses due to uninhabitable property and liability protection in an event of a lawsuit. This policy only covers the landlord’s belongings and not the tenants. It is thus advisable to as the tenants to get their belongings covered by buying a separate renter’s insurance. The landlord insurance policy is always much expensive than your primary residential insurance.
Damage done by tenants
Bad tenants can do a lot of damage to your property which will be more than what their security deposits can cover. As an owner, you must realize this and make frequent visits to your property. It is thus important that you select the tenant carefully. A good tenant should responsibly treat your property as it were their own.
If you get a tenant who treats your property nicely, you should not let them go easily. You can also compromise on raising the rents each year if the tenant is a good tenant.
You can set aside 1 percent of the cost of your property for maintenance purpose. Also, when you visit the property, you should notice if anything requires upkeeping and invest the money before it causes more damage to the property.
It is important that you establish the rules from the day one. It should be clear in the minds of the tenant that they cannot bend the rules as per their ease. You should also think through the actions you will need to take if they fail to abide by. Ask your friends, relatives or co-workers if they too have a tenant on their rental property what rules have they established with them.
Conclusion
Being a landlord is a pledge you take to yourself that you will invest not only your money but also the time that the property will demand from you. It can be really exhausting and stressful to be a landlord, but with time this can give you a good return on investment.
The duties and the responsibilities of being a landlord should not scare you off. Just like other investments, a little determination and hard work from you can earn you great profits.