Back again with our special show ‘Invest Like a Pro!’ A quick start guide to adding real estate to your portfolio!
And we’re going to wrap up the show by continuing our look at a tried and true method of becoming a real estate investor – and that is – when you move to another house – keep the first one, and just rent it out!
In our first hour we talked about all the ways to get ready for that step – including making sure you’ll generate enough rental income, and whether your lender will approve you, to carry both properties.
But now, let’s say it all worked out – and you did it. You are now living in a new home, and your old one up for rent.
Well I know, you want to find a tenant, and get those rent checks rolling in. But there are some thing you should do before all that.
First, check with your REALTOR® about all the local rules and regs about renting out your house. Some places require landlords to have a business license, and to have the home inspected first. That’s a good idea, because for the most part those inspections are all about safety! And you might learn a few things. Like, some places require the interior part of a deadbolt to open with a latch instead of a key, so that if there’s an emergency, the tenant won’t have to search for the key – just to get out! So that inspection can be really important.
OK, next, you’ll have to advertise the place, and make sure potential tenants can find it. Your REALTOR® can help you with that too. They can get the photos done, work through a description of the property, and get it all online.
Your REALTOR® can also help you evaluate tenants, check their references and pull their credit…which can help you know whether they’re a good candidate, or not.
That may be the most important step – finding a good tenant. Someone who pays the rent reliably every month. Who keeps the place clean, and takes care of it. Find a good tenant? And you’re pretty much on your way.
And finally, your REALTOR® can help you draw up the lease, and to make sure all the required paperwork is in place. Finally, they can collect the rent, the security deposit and and other fees, and basically, take care of all of that.
Now, some landlords prefer to do all that themselves. And that’s fine if you have the time. And if you know the local laws about renting out property.
Once you find a tenant, you’ll have to decide whether you want to handle it yourself from that point forward, or whether a property manager makes more sense.
Many people do handle it themselves. If an appliance breaks down, they arrange to have another one brought in. If the shower won’t drain, they call in a plumber. That sort of thing. It’s not really that hard. But if you don’t have time, and if you own multiple properties, consider asking your REALTOR® about managing the property. They’ll take care of everything, for a fee, and you just sit back and collect the rent checks.
OK, so that’s that. You now own two houses. One is your primary residence, one is your old house – that you rent out.
Now, just think about what that means to you, and your family moving forward.
If the rent is sufficient to pay the mortgage, you are really building wealth with that investment. Every month, the mortgage is paid down, bit by bit, using someone else’s money. And over time, as rents increase, that will happen faster. Plus – don’t forget that if property values rise, your wealth grows too. The equity in that first house – and the one you live in – will add up to become a substantial part of your financial picture.
So – with that one big move – renting out the place you live in, when you move to another home – makes you a bona-fide real estate investor. Which only leaves one more question….the NEXT time you move – should you do it again ?