Things to Know Before Buying Rental Real Estate Property

Rental real estate investing is a great way to make monthly income while also watching your investments grow. But being a landlord isn’t for everybody. If you’re thinking about taking the plunge into rental real estate investing, here are a few things that you should keep in the back of your mind.

Property taxes can get truly insane

It is vitally important to know how property taxes work in your state, county, and city before you purchase a rental property. As the value of your property goes up, your property taxes could skyrocket overnight. In hot markets like Austin, for example, it’s not uncommon for property taxes to go up 100% to 300% in a single year.

There are lots of other unexpected costs, too

Being a landlord means dealing with tenants, and not all tenants are created equally. If you end up with bad tenants, they could do thousands of dollars’ worth of damage to your property before you realize that there’s even an issue. A bad tenant might also break your lease and leave in the middle of the night. That could leave you with lots of uncovered costs, not to mention the hassle of finding a new tenant as quickly as possible.

To be a landlord, you have to be tough

Unless your tenants are all perfect angels, you will need to lay down the law from time to time. That means demanding late rent and, in the worst case, evicting people. Evicting a person is never an easy thing to do, but sometimes it’s your only course of action. That means that you have to be ready to take that action if and when necessary. The most important thing is laying down terms and sticking to them.

You don’t have to do all of the hard work yourself

The silver lining of the above issues is that you can hire a property management firm to manage your property for you. Your monthly earnings will take a small hit, but you’ll be left with a lot less hassle on your plate. Depending on how long term your investment is and what other responsibilities you have, hiring a property management firm is definitely worth your consideration.

Buying property near your own home isn’t necessarily the best choice

In order to maximize your rental property profits, it might make more sense to look outside of your own neighborhood. Working across county and even, potentially, state lines might help you find the best rental markets. And remember that every time you travel to that market, your travel expenses will be tax-deductible.

Buy and hold loans can help you go further, faster

Borrowing rental real estate funding from a private lender is an optimal way to reduce your risks and put your capital to better use. The right buy and hold loan can help you purchase a rental property earlier in your career, or it can help you invest in multiple rental properties at once. Rental real estate funding is a great choice for minimizing your personal risk while maximizing your investments.