Things to Consider When Buying a Rental Property
Owning a rental property is a big investment. This investment can also have several benefits. One of these is that it can provide a passive source of income. Owning a rental property also comes with different tax benefits, such as the interest on your mortgage, and the ability to deduct interest and provide a high ROI. The key to obtaining rewards from a rental property is to find the best one, so that you can get the best possible return on your investment. Here are the most effective tips to help you find the right rental property for you in Orange County, California.
Find the Right Location
The rental property should be located in an area that is stable and has a growing population. Look for a neighborhood that has low crime rates and is known for being safe. No one would want to rent a property in a place with rising criminal activity. The area should also have a growing job market and plenty of amenities, such as parks, theaters, malls, and restaurants, to attract renters. If you rent near a university, you should expect that most of your tenants will be students. On the other hand, if you are going to buy family-sized homes, keep in mind that there should be good schools nearby. Another important factor is the future of the area. There should be future developments in the neighborhood, but make sure that any new homes will not be in direct competition with your property.
You will have to declare rental income on your taxes, and they will vary according to the area where the property is located. High property taxes in a neighborhood might lead to you losing money and could be unappealing to potential renters. Talk with current homeowners in the community or go to the municipality’s assessment office to find out more about the tax information associated with a property before you buy it. Find out if the property taxes will go up in the future as well. Sometimes they can go up as much as 300% in a short period of time, which will affect your rent and the profit you will be able to make as a result.
Don’t Buy the Cheapest Home
Buying the cheapest property on the market is not always the best policy. There is usually a reason why the cost is so low. This may be due to a necessary renovation that will actually end up costing you more in the long run. Look for a property that only needs small repairs and is still within your budget. If a property does need a larger renovation, make sure to get several contractor bids for the work needed to be done before buying, so you know exactly how much the repairs will cost.
Get Landlord Insurance
Having Landlord insurance is a crucial step to protecting your investment. It is a policy that covers the property from a variety of risks including loss of rent due to tenant default, vandalism by tenants or their guests, and theft by tenants or their guests. Landlord insurance will protect you from financial losses overall.
If you have any questions or need any assistance, you can contact JAM Properties, LLC. We have served our clients in Orange County, California, for over 10 years. As real estate investors, we know what to look for when buying a rental property. Contact us today!