RENT RATES Wondering how rental rates get determined ? Most property owners / landlords follow the 1 percent rule , meaning they charge between 0.8 percent and 1.1 percent of the home ’ s value . But it ’ s also wise to check the rent prices of local comparable properties .
LACK OF SUPPLY & RISING PRICES
According to Zillow , the average monthly rent ( across the country ) went above $ 2,000 in mid-2022 .
RENT RATES Wondering how rental rates get determined ? Most property owners / landlords follow the 1 percent rule , meaning they charge between 0.8 percent and 1.1 percent of the home ’ s value . But it ’ s also wise to check the rent prices of local comparable properties .
MONEY MATTERS
Rental property investing has some specific financial factors to consider before you begin .
• Successful Central Alabama rental property investor Deborah Dias advises buying within your means . “ Make sure you have enough for the property PLUS the needed renovations and repairs . Don ’ t overextend yourself trying to make a buck . It ’ s way too stressful ,” she said .
• Many lenders consider a loan for a rental property riskier than a loan for the same property that will be lived in by the owner .
• Insurance on rental properties is higher too .
• “ Talk to your banker or lender about your business goals and pre-approval to purchase ,” said Carol Bowman , a Realtor with Lucretia Cauthen Realty , “ and have a financial plan in place to make repairs , perform maintenance and carry the mortgage costs between renters .”
• Know ( and follow !) all the provisions and requirements of the Fair Housing Act as well as other laws and legal paperwork pertaining to rental properties . “ Talk to your property manager or attorney about the documents needed , like an application and a lease ,” Bowman said .
• Dias added this : “ You need a thorough application process to help you determine who the right renters are . My criteria are no past evictions ; gross income three times the rent ; and three months verifiable income ,” she said . “ From my experience , finding tenants with good credit has been a bit of a challenge , so I keep an open mind regarding the circumstances that brought down their credit score .”
• Pay attention to the tax benefits ; some costs associated with your rental home can be deducted , and a 1031 exchange is another tax perk to explore , and one that Dias has used . “ I have sold a house in the 1031 exchange sales structure ,” she said . “ It allows you to defer capital gains from the sale by ‘ exchanging ’ like properties .”
• Have a plan in place for managing your property . Will you do it , hire a property manager to handle it all or take a hybrid approach ?
LACK OF SUPPLY & RISING PRICES
WERE THE TWO BIGGEST CHALLENGES FOR RESIDENTIAL REAL ESTATE INVESTORS IN 2022 .
PRO TIP :
Zillow helps landlords screen potential renters using an online application and background checks .
26 CentrAL Inc !