Buying A Second Home to Rent

There are some financial benefits of investing in rental property, but at the same time there are some risks. As a landlord, you must know about the tenants who do not pay their rents. This is a headache for the landlords. You will have to need to weigh taxes, real estate appreciation, mortgage and maintenance costs. You want to own a rental property to become a landlord and earn. Is it a good financial move for you? To know the answer, read this article for some Do's and Don’ts.

Pay Keen Attention to Tax Advantages

Do think about the tax advantages. You can cut down rates to lower down the expenses. You have to deduct interest, tax, insurance and other expenses. Do these deductions against the property’s income. You usually do deduction, which deducts losses from other income. For more deductions, you can deduct depreciation cost from taxes. Because of the deductions you can sell a rental property. You can sell out rental property without paying capital gains taxes.

Think like a Landlord

Rental property is also a business which needs full time and energy like any other business. You will need to keep in touch with rental laws and formalities. Keep yourself up-to-date on legalities. It is necessary in order to maintain safe and habitual property for your tenants. Always remember, a tenant who is paying you dollars has right to expect better response from you. A tenant does not expect any problem in the building. Tenants who are paying little less rent from the market, they are usually less demanding. But other tenants who are paying up to par rent are highly demanded. As a landlord it is your responsibility to make up your home. Repair your home before renting it out. If taking care of your home seems difficult for you because of time or any other factor. You can ask for a manager or caretaker.

Do Your Homework for Real Estate property

Spend much time in searching rental property. Do not crack the first deal you come across. Research in the rental property business is important. So, do your homework in searching the best real estate rental property. You should know about the market rates, zones, locations, laws and rules, market trends and all fees. Always look for the location like near to school, parks, shopping malls and offices. In these areas most tenants want to live for their own convenience.

You will have a thought of making your property attractive to tenants. Look for a property with good landscape and interior. Always try to buy rental property near beautiful views, beaches, or near to school, colleges and offices. The neighborhood is important to many tenants. They always look for good neighbor. So, you should opt out a stable community so that more and more tenants want to live.

Do Calculate your Numbers Monthly.

Always analyze your monthly housing costs. So, it is important for you to calculate all the numbers regarding all expenses and costs. A calculation needs keen attention so, use smartphone apps, online software or online mortgage calculator. A calculator will allow you to enter and calculate purchase price, down payment, taxes, insurance and mortgage loan interest rate. The one important note about the mortgage rates on rental property are, they are typically higher than the rates for a primary home.

Also add the costs of maintenance and repairs. A good rule to nail the rental property is about 2% of the purchase price per year is compulsory for repairing and maintenance. So, a $600,000 property would cost roughly $6,000 per year to maintain. Although, you can increase the percentage from 2% to 2.5% if you want and the property is getting older.