Real Estate

So you want to be a landlord

Rental property can be a great investment. As an investor you provide a much needed commodity for a person or family while they pay the mortgage on the house and provide you with a little extra money each month. Over the years I have helped several people start and/or add to their rental portfolio. Most of my clients tend to manage their own properties, while others find a property manager to screen tenants, and hire maintenance people.
Banking rules regarding investment property have changed greatly over the past several years, so it is advisable that you speak with a banker prior to starting your search. You should also obtain a copy of the landlord/tenant act and read it, study it, and read it again. It is important that you understand what the law says regarding your rights and responsibilities.
As you begin your search for your first rental, you will need to decide where you would like to buy. You might consider looking close to you where you work or live so you can check on it, especially if you are planning on managing it yourself.
Once you have found the property and purchased it you will want to get it rented as soon as possible. Investors don’t like their properties to be vacant. It costs money to have a vacant rental and there is always the risk of vandalism. However, I think it is worse to put an unqualified person into the unit who tears up the property and doesn’t pay you.
The most important and complex part of renting is screening the tenant. Have an application that you have everyone interested in renting fill out. You can use one from the office supply store or make one up yourself. Some landlords charge a nominal fee to run an application. This often deters people who know they don’t qualify from applying. I personally do not charge a fee. You will need to verify the information on the application to make sure it is true. I suggest verifying the address on the applicants driver’s license to the application. Check to see who actually owns the property where they live, verify that is the same name that is listed on the application. If not, it could be a property manager. The law in Oklahoma says that a property manager who is not the owner of the property managed must possess a Oklahoma real estate license. Verify all phone numbers to see who they actually belong to before calling them. They could be the applicants friends. I had an applicant that listed a cell number for his employer and said that was the only number he had. So I asked to see pay stubs. He had none and said he got paid in cash. I can’t verify that and didn’t rent to him.
Determine what your criteria you are going to use to qualify a tenant. My qualifications are 3x the rent in income (meaning if rent is $1000 a month, tenant must earn $3000 a month or more), no evictions, or felony convictions. You need to use these same requirements for each and every tenant. You will want to decide if you are willing to rent to people who smoke or not (although I think this is crazy to monitor) and also if you are willing to accept pets. If you do accept pets, I would suggest a pet deposit. A pet deposit is very common.
Once you have approved a tenant, have everyone sign a lease. The lease should be comprehensive. In real estate everything needs to be in writing so put it in writing so everyone has the same expectations.
This is just the beginning. This is not meant to be inclusive and if you have legal questions, please contact a lawyer. I will blog some more later about what should be in a lease as well as other landlord issues.
If you are looking for a Realtor who understands rental properties and are interested in buying or selling investment properties, please feel free to call me at 450-213-2992 or visit my website at http://www.sandiwalker.com

Real Estate

Why would you rent when you could buy?

People rent property rather than buying a home for various reasons. They may not be in a financial position to purchaseat this time,  they may be in an area for a short period of time, or they may not want to be responsible  for maintaining a home.

1. In order to purchase a home you need to have acceptable credit and have a down payment.  There are some down payment assistance programs available for people who qualify.  These programs are generally aimed at first time homeowners (someone who has not owned a house within the past 3 years) and makes less than a certain dollar amount.  If you are able to save and put a larger down payment down then you may qualify for a loan without MI and save a lot of money on mortgage insurance.  In addition, it is advised to have a little savings incase you need to repair items in the home.

2. If you are only planning on staying in the home for a short period of time usually less than 3-5 years, it may not be advantageous for you to purchase. Unfortunately, during the first years on a standard 30 year note the borrower only pays a small amount to principle reduction. The rest goes to interest, taxes, insurance and often MI. It cost money to sell the property. Not only in commissions but other closing costs. The property will most likely not appreciate enough in a short amount of time to cover all the costs of selling.

3. Some people do not want the responsiblity of maintaining a home. There are always maintenance items to consider when purchasing a home. The house needs to be properly maintained or it will become dilapidated and most likely lose value. If not properly maintained you could have roof issues, water issues, mold issues, heat or cooling issues and so on. Maintenance is probably the number one con to homeownership.

Now with all that being said, Homeownership is still the American Dream. It is still a great adventure and the wealthiest people in this country own property. I think that it is a great investment. Sometimes values do go down, but over time we have seen appreciation. In addition, you have to live somewhere so it might as well be in something that you own. I do think that there is a time and place for everything. Sometimes it makes sense to rent for a season until you are ready to buy.

When you are ready to buy, I will be happy to help you. I want my buyers to be successful and happy. If you want more information regarding real estate, please call me at 405-213-2992 or visit my website at www.sandiwalker.com.