Rental Property START guide questions
Rental property All Guide:
My goal here it to have a step by step reference guide for myself and other beginners.
I’ll start from the beginning as far how I think as step by steps go:
1. you’ll need homeowners insurance to get a loan from the bank. They won’t give you a mortgage on a property that is uninsured and could burn down tomorrow. Work with your insurance agent to get a low premium that has the coverage you need right around the same time you do your inspections. If you back out due to inspections, it’s no big deal bc you won’t pay until closing. It just helps the process to have it lined up for your loan underwriter.
1. Get pre approval by the bank with good rates for a conventional loan with a 30 year mortage to keep my debt to income ratio low. Consider where i’d live in the house for a year minimum.
1 1/2: set up seperate bank account for all rental property fiances. Maybe set up a second one for reserves cash.
2. Work with real estate agent to find rental property somewhere I’d like to live (for a year minimum) Preferably with vetted tentats already living in it.
Buying property with tenants already in it: https://www.avail.co/education/articles/how-to-buy-or-sell-a-rental-property-with-current-tenants
3. Do the math. Consider average cost houses in that area are selling, taxes on the house, closing costs, maintenance costs, umbrella insurance costs, PMI costs until I own 20% of the property... Run ROI scenarios. Make sure the tenants are paying my monthly payments on the house with sole profit....What elese am i missing here?
4. Purchase the property being sure to bargin 20-30% lower than asking price unless price is fair as is.
5. Get professional inspection of home after agreed upon deal. Should I use homeadvisor for this?
6. Renovate if needed. Again, should I use homeadvisor for any renovations?
7. Purchaes umbrella insurance or LLC for
home.
8. If renters arent already in home, need to find a service that completly vets potiental renters for home... Is a background check enough?
9. Rent should be established using 70% occupancy rule. So basically if the mortgage was $700 per month. You would want to try and bring in $1000 per month to cover the mortgage in case the unit is vacant for a month or 2 while search for a replacement tenant.
10.Hire property manager? Is this nescarry for just one house? I’m not sure I could get calls about fixing the house during most business hours while starting out this rental property business.
11.Write up Rental property agreement. Is a real estate lawyer neacarry here to do this? I would want this to be extremely thurough so i assume a lawyer is the safest option. I have no experience with understanding renter-landlord rules and laws. What can I do to better prepare myself?
12. Collect rent and file taxes appropriately.
Now the #1 question here is... What am I missing here? Please help as I want to understand the ins and out of this business.
Thanks,
-Tyler