A few things for landlords to think about when buying rental property.

The list below is far from exhaustive in fact each topic could be its own blog article. It is really food for thought. I always recommend using a local Realtor (preferably one also familiar with the rental side as well) in your market when buying property to rent out. Not only can a local Realtor provide a lot of advice and market information; they can also recommend other professionals that are advisable or needed before and  during your property search/due diligence period. Also they can recommend  other professionals and vendors needed after you bought the property and during the rental phrase.  

Market Research.  

It is important to analyze the local market.  Months of inventory, DOM, sale to list price ratio, history, trends, vacancy rates and more are important. Residential sales and rental market knowledge will be equally crucial in evaluating what type of property to acquire, what if any upgrades/ improvements make sense.  Any property being acquired to rent out should also be looked at from the angle of what if I need, want or must sell later. 

*There are all kinds of AVM (Auto Valuation Models) tools out there some free some cost money. Not all of them are equal. Margin of errors, data accuracy, age of data and more is important. Other considerations equally important are micro location, condition, upgrades, features, financing, arms length transaction, distressed property,  and much more.  We have AVM in our professional software. AVM has its place and time however (surface level data among them) it should never be used in lieu of a CMA/Rental Price Analysis.

HOA  

Due diligence on the HOA is important for any buyer, especially a landlord. Some HOA’s will have restrictions on the percentage of houses that can be rented. A few may require the board screen and approve the tenants in addition to the landlord doing that. I have had tenant clients in the past that did not want to go through the additional hassle and time, especially if they are pressed on time. This may potentially result in the property sitting vacant for longer.  Additional money will be spent on HOA dues, possible future special assessments. It may be better to select a house that is in a non-HOA subdivision.   

 Conformity AKA Principal of Conformity

The Art deco or brutalist property in a subdivision of Tudor style and Elizabethan houses may be one worth passing on. The subdivision where all the houses look identical (too much uniformity) may be better to pass on.  Every local market and neighborhood is different as to the accepted norms of architectural design & construction. Something out of place or over the top for your neighborhood/subdivision may not make the best sense to buy. The subdivision that all the houses that look identical (too much uniformity) may be better to pass on. 

Construction Type and Maintenance Considerations.  

A house that is all brick with hardwood flooring may be a better property than one with carpet and freshly painted wood siding. As far as stress, time and money potentially spent on cleaning, repairing or replacing. This also must be considered with any repairs, upgrades and improvements that may be needed.  *It is a good practical idea to give a copy manufacture’s insurrections for cleaning hardwoods/floor and go over with tenant. I have heard a few stories of tenants actually mopping hardwoods floor with a mop and bucket of water. (Nothing is 100%) 

Pools. 

Pools, while they can look fantastic in a real estate brochure. For landlords they often cause more problems than they are worth. Ongoing maintenance and service will be needed. If neglected, it can cause problems, health hazards and expensive repair bills. However well maintained it is something that will eventually need repairing or replacing a pump, a filter, pool alarms, plumbing, pool lighting etc.   

 Pool-related accidents and injuries are another major source of frustration for landlords and property managers. Common sense is a vanishing life skill these days that is especially true around pools.  I have seen people in the pool in the middle of a thunderstorm; I have arrived to show properties with pool gate left unlocked or wide open. I have seen plenty of people running around a pool, drunk around a pool, etc.   

That all being said if it is a luxury mansion like the ones you read about celebrities renting in metro Atlanta when filming or making a new record. It may be expected or more common to have a pool. However, safeguards and expert advice are still warranted.   

Distressed Properties & Fixer Uppers.  

Both have the potential for great bargains and great losses as well as a lot of extra stress.  You should expect additional experts (outside of home inspectors) to be needed or advisable. It’s important to understand what you are getting into and that you do not bite off more than you can chew or comfortable chewing at least.  

There are different types of distressed property (Short sale, foreclosure, tax sale, owner in financial problems etc.). They are often confused with fixer uppers. While it is not unusual for a distressed property to also be a fixer upper. Fixer uppers there are different levels of fixer uppers. You have tear downs, major repairs, ones that need lots of moderate-minor repairs and cosmetic issues.   

Move In Ready Property.   

It still should have a home inspection (still no guarantee another specialized expert may not still be needed). Bargain potential will be low, however real estate is negotiable and perhaps the sellers want to sell fast because of a job transfer, tired of dealing with it or other reasons and is not keen on it sitting vacant or renting it out.  Depending on your plans/strategy and comfort level, this may work for you. 

Conclusion

While this blog post was written primarily with houses in mind there are many types of rental property. All of the above are great things to discuss with your REALTOR. They can advise on that much more including many things experienced landlords overlook when look when buying properties and prior to listing them for rent.  Just as no two properties are 100% alike no two landlords/investors are so it’s important that you have good communication and repour with your REALTOR. It’s important that the understand your current and future objectives. That also applies when you list the property for rent.  I hope you enjoyed reading and look forward to talking with you if you are in the market to acquire rental property. 

*This is not legal, financial or tax advice. If you need or want legal, financial or tax advice an Attorney, Financial advisor or Tax advisor should be consulted. *This article is for general real estate information purposes only. It is no way meant for specific real estate advice and a local Realtor in your market should be consulted. *This in no way implies or creates a client, customer or any kind of business relationship.