Buying a rental property could be a wise investment. But what if this is your first time? In this article, we have some tips about things to know before purchasing your first rental property. We also encourage you to be sure of this investment because it could put you in a wealthy position in the first place.
Buying a rental property – Being a landlord
If you want to invest in properties, you should be ready to be a landlord. Being a landlord also means that you need to be comfortable with the toolbox, taking care of the toilet and unclogging it, repairing drywall, and so on. On the other hand, it also means that you need to have spare cash or do the work on your own.
The thing is that a landlord should be handy or should have lots of spare cash. If those two things are not in your comfy zone then a landlord is not a job for you.
Buying a rental property – Finish your personal debt
Before you start investing or buying a rental property for your business, it is important to pay out the personal debt in the first place. According to experts, being in a property business might not be for you if you still have student loans, children who will attend a college or unpaid medical bills. The calculation is the key.
On the other hand, making income from a rental property could be very risky. As we have mentioned earlier, being a landlord is another tricky thing to do while you know nothing about handiness skill.
Buying a rental property – Make a down payment
For your information, investing in properties will require you to pay a larger down payment than properties occupied by the owner. In other words, they have stringent requirements to get approved. Generally, you need to pay at least 20 percent of the house’s value for the down payment meanwhile, the mortgage insurance is not available for this kind of property.
Pros and Cons of Buying a Rental Property
Just like other business types, investing in rental properties will show you some pros and cons as well. In the end, these things are the points you should consider before deciding the first place
The good thing is that you will get a passive income. Your income will also grow as from time to time considering property business is always going that way as well. Social Security tax will not include your rental income. Other than investing in the stock market, real estate has a more stable ground. Other than that, you have a physical asset unlike if you invest in stocks.
However, the passive income can be screwed up if your tenants cannot be supportive. Still, you can manage this by hiring a property manager. If you can make the adjusted gross income more than USD 200,000 for single or USD 250,000 for a married couple, you may need to pay surtax for 3.8 percent and it includes the rental income. There are things you need to consider before buying a rental property.