Buying a Rental Property, Assembling the Team and Reducing Risk

Buying a rental property is fun, but it certainly needs to be done with care and a ton of research. Since a rental property is a long-term investment, you want to make sure you review all considerations.

 You are putting a lot of money into a property for a down payment, so you need to arm yourself with all the information you need to make a profitable investment. This is week four of our real estate investments series.

 The guys talk in depth about buying a rental property, assembling your team and reducing risk.

Are the local laws in your favor?

EVICTION LAWS! Find out what the eviction laws are before committing yourself (and money) to a particular area. Of course, you don’t want to have to evict a tenant, but if someone is living in your place and not paying you to rent for months, you got to do what you got to do.

How long does it take to evict someone? In places like NJ, it can take months to have someone legally evicted while you wait around losing money.

How easy is it to raise the rent? There could be rent stabilization laws in place to don’t allow you to raise rents as you see fit. How likely is it that you can use their security deposit for damages?

Getting answers to all these questions is super important. Start by looking for a place that are “landlord friendly states.” The top 8 states – Texas, Indiana, Colorado, Georgia, Kentucky, Mississippi, Arizona, Florida

General Property Grade

Location, location, location. The location is critical in buying a rental property. Each rental property you look at will have a grade, A through D. This will help you determine if the property is investment grade.

It’s In summary, buying an “investment grade” property is about focusing on the key criteria that will keep your property occupied and stress-free. Here is the breakdown of the ratings.

A Property:

Newly built properties in the nicest areas. High-quality buildings that are newer (built within the last 15 years) They may include premium with top amenities attracting high-income families. You will also see much higher and much less maintenance, but it comes with a much greater down payment and lower returns.

B Property:

The slightly older property, but still nice. Might be not quite as nice of an area. Tend to have middle-class tenants. Rental income is typically lower than Class A and may have some small maintenance issues. For the most part, they are in good condition, live in ready and will some upgrades can be moved to a Class A

C Property:

Older properties, more than 20 years old and located in fewer desirable areas. Likely, they also really could use some work. However, for investors, these rentals have high returns

D Property:

Run down properties in bad areas. The area and the property can be described separately. It’s possible to have a run-down property in a great area. Harder to have a great property in a bad area, though.

It’s important for an investor to understand that each class of property come with varying levels of risk and reward.

Crime rates and school quality also need to be taken into consideration. We will soon have these ratings pulled into our Rental Property Tool, but the info is readily accessible.

Understanding Vacancy Rates and Potential Tenants

When buying a rental property vacancy is inevitable. The vacancy rate is the percentage of all available units in a particular area that is unoccupied at a given time.

Look at the US Census data on vacancy rates in the area you’re seeking to purchase in. With 2 minutes of research,

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