Questions to Ask Agent/Owner for 1st Rental Property
Member since 2019 · 3 posts · 0 votes
Hi All,
I've been looking for my first investment property since the summer. I've been very carefully searching in hopes of making the best decision, and avoiding some of the common 1st timer mistakes. I'm preparing to make an offer on a 3br/2ba condo this week, and want to know what questions I should pose to the seller/agent before doing so. Any good questions that I might not be thinking of? Thanks in advance for your feedback.
-CC
@Courtney Cleveland, congrats on your first step to becoming a landlord! as you evaluate your options, there are a couple of things that you can do to justify your decision and to avoid the major mistakes and make sure the condo is a worthy investment. While you are asking for questions to your agent, the agent will not be able to tell you whether this is a good investment for you or not, as you are the one to make such determination. Keep in mind that the agent's job is to sell the unit in order to make their commission. Below are some areas you need to consider:
1. ask yourself whether you are purchasing this condo to hold and buy, or just to hold for a short period of time and then sell for a profit. If short period of time, you need to look at the market trends whether your property will be increasing in value in the near future and whether this is worth your time. Generally, Condos do not appreciate as quickly as SFH.
2. If you are purchasing in the hopes to buy and hold/rent, make sure you check that the condo rules do not prevent you from renting the unit. You don't want to complete the transaction and afterwards find out that the unit is owner-occupied only or the rental cap has been reached. That will force you to sell, and potentially at a loss. While most condos dont share their Rules with just anyone, you can ask your agent inquire whether there are any limitations on renting the unit. If there are, then this is not the condo for you.
3. work with a loan/mortgage agent to make sure you have a clear idea of how much your PITI + Condo association costs will be and compare that number with the potential rent that you will be collecting. This should allow you to calculate your return and whether this will be worth your investment. When calculating your return, make sure you account for vacancy rates + maintenance costs to the unit. My rule of thumb is 10-15% of your your monthly rent should go to that bucket, however everyone has their own. However you decide to do it, just be realistic about it. For example, if you anticipate that for 1 month of the year the unit will be vacant, subtract the amount of rent for that month from your income, before you calculate your cash flow. do the same for your maintenance cost, so you get an idea of what your true Cash Flow would look like.
4. Just like you inquire for the rental limitations, ask if there are any special assessments coming up for the condo. If the condo is preparing to change the roof, the cost of it would be distributed equally to the condo owners, which could mean thousands of dollars. While it might not affect your decision, it is good for you to be informed and anticipate.
5. Have your real estate agent run comparable units that are rented in the complex. While you think you can rent the unit for a certain amount, the rental amount is dictated by the market and similar units that are listed for rent near yours. your calculations should be performed with a realistic monthly rent that you know you will not have a hard time renting your unit.
I hope this helps for you. I am sure there are other things that you could be asking about, but these are the main things that you can ask to give you a feel for whether this is worth pursuing. best of luck.
I agree with all of @Nik Corbaxhi 's points.
Also, if you have your own real estate agent, be aware that they probably get some kind of benefit from anyone they refer you to in the sale process, like a home inspector. Both parties are smart enough to call it a "referral bonus" or something similar, so as not to raise eyebrows. For nearly everything like that, it's possible for you to find and hire someone on your own, and I recommend doing so, at least for the inspection.
You may have researched this already, but you might check with your city's building code people to see if there are any required upgrades you have to make, either because the property is old, or because you're making it a rental. Sometimes they are a little more strict with condos (compared to a single-family residence) because a fire or other big problem in your unit has the potential to affect the neighbors too. There's a decent chance that they won't require anything beyond what's there now, and also a decent chance that it's something simple that you can do, like hanging up more smoke detectors. In case it's more complicated than that, it's good to know about it before making an offer.