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Has anyone here ever purchased a rental property? I'm considering purchasing a single-family home and I'm curious how someone selects a specific property and a specific neighborhood/location.
Selecting the property itself seems fairly straightforward: work with a realtor to find a house within your budget and make sure it doesn't have any major issues. I know what I'm looking for: a house that is move-in ready and doesn't need a whole lot of fixing up. Obviously, there will be upkeep costs and I'm realistic about that. What I really don't want is to purchase a 200k house and find out I need to replace the entire foundation for another 50 grand. This seems like something a realtor can help me with especially if the house has publicly available inspections.
I already have a general idea of the location where I want to buy. I have family who live close by and they would be able to help me manage the property. But even within a 5-10 mile area, I'm thinking there must be criteria for selecting a better neighborhood than others. Obviously cost comes into play here as well, but without spending a lot of time on the ground, I'm unsure how I would select a location where the house *at least *retains its value.
Any input from those with rental properties, especially those who own in a different state, would be appreciated.
I've had rental property before. A few notes:
The economics of it are a little tricky and rather different than buying as a personal home. You have to know all of, what you can actually buy the property for, what kind of financing you can get, and what you can actually rent it for, and balance them to make it actually profitable. Specifically, it's not to your benefit to make rental property too nice. In most markets, rent that tenants will actually pay is mostly based on location and bedroom count, most updates and amenities won't get you anything in higher rent. Being truly broken down or a dump won't rent, but it's not to your benefit to buy or make a property significantly nicer than the average rental in the market you're targeting.
You need to be familiar with the landlord-tenant laws in your jurisdiction. Know what's involved in evicting somebody, what obligations you have for security deposits, and any other requirements that might be in place.
You may or may not want a realtor for the property purchase, but you'll need one for the rental. You need somebody who knows how and where to advertise to tenants, screen tenants, and set up rental contracts. You definitely need a standard, good-quality contract, and you definitely need to screen, as a bad tenant can seriously wreck your finances, especially if eviction is difficult in your jurisdiction.
There will be some management work too. You need to know who to call when things break down, and it helps a lot if you are personally handy enough to deal with minor issues without hiring more contractors. Plan on needing to take time off during business hours to meet contractors or delivery people at least once a year. If you can't do it yourself due to your own work obligations or being too far away, you need somebody else who is local and reliably available on call to handle that sort of thing.
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