Investing in real estate properties is a superlative choice for many investors. Demand will only continue to increase with time, and the benefits of renting out your property to others are myriad.
However, there are certain risks that you should be aware of before you decide to invest. Here, we will provide some renting tips for long-distance landlords.
Why do you rent your house?
For many investors, investing in real estate is intended to increase their monthly and annual income. Renting one’s property will help keep inflation at bay. In other words, as prices go up, the value of your rental property will rise as well.
Owning a rental home or apartment will also provide you with very high leverage. Most investors will be able to get a loan for a rental home with relative ease. Rental prices continue to increase, which may not be good news for tenants, but it is good news for landlords.
As such, you can maximize your return on investment by purchasing a property at a relatively low price, and renting it at a price that yields significant profits in the long run. Renting your property will also provide you with a passive source of income.
You can use the money to pay the mortgage on your main residence, or you can even retire from the money you make renting your property. You will also usually have the option to sell whenever you want to.
There are many exit strategies available, with most generating significant profits for landlords who wish to retire or move on to other investment opportunities. Moreover, you may be able to take advantage of several rental property tax deductions.
Examples include insurance, repairs, interest, and depreciation. In addition, owning a rental home will allow you to hold it for high appreciation. Still, you should perform the necessary due diligence in order to learn more about the location of the property, as well as its key demographics.
We should also note that you will have the option to move back if you run into some financial issues in the future, which will provide peace of mind. Additionally, there is the benefit of greater security when you rent out your home.
A home that is left vacant will be vulnerable to arson, theft, and vandalism. A home that is occupied by hard-working tenants will be well taken care of. Purchasing a rental property will also allow you to diversify your portfolio, which can serve as extra protection against risk.
Common Mistakes to Avoid
If you are a long-distance landlord, then there are certain risks that you need to be aware of. First, you need to research the location. Make sure that it is safe, and that the unemployment rate is low and the median income is high.
Do not skip the analysis process. It may take some time and money, but investing in a rental property should be seen as a marathon and not a sprint. Crunch the numbers in order to make an informed decision.
Do not be fooled by glossy pictures or flashy videos with a catchy background jingle. We would also recommend that you hire a real estate agent who works in the area. Their expertise in the real estate market and the local community can provide you with valuable insights that can help you protect your investment.
Local property management companies should be researched before you sign the papers. Trying to manage a property while you are in another city or country will be difficult. However, if you hire a property manager, the long-term investment process will be much easier.
The potential of renting out Airbnbs should be examined. Note, however, that in some cases owning an Airbnb investment property may be prohibited in your jurisdiction, or it may simply be a poor investment. However, if you are investing in an Airbnb that is situated out of your state, province, or country, then you will be able to invest in an Airbnb anywhere in North America.
In addition, it is imperative that you do not forget to update your lease agreement. You also need to learn all of the provincial or state tenant and landlord laws before you make the final move.
As well, regular property checkups should be made. You can use smart-based technology for quick remote screenings, but we advise that you inspect the property in person on a routine basis.
Checklist for a Long-Distance Landlord
First, you must vet each prospective tenant. You also need to ensure that your financial affairs are in order, and communicate frequently with your tenants to make certain that everything is good on their end.
You should be fully aware of the paperwork and legal issues that are involved in owning a rental property. The forms that you complete must be specific to the state or province in which the rental property is situated.
Inspect and document everything for posterity, leaving no stone left unturned. We recommend taking out rental property insurance in order to cover all of your bases. You should also try and become friends with local maintenance and repair people, as they may be able to help you even if you are hundreds or thousands of miles away.
It is very important to inspect the entire property from top to bottom, repairing any issues that you come across to ensure it is up to code. An authorized tenant insurance provider can help provide peace of mind and protect your hard-earned investment in the event of a disaster or legal dispute.
Protect What Matters
Renting out a rental home will allow you to enjoy a passive source of income and diversify your investment portfolio. However, you should avoid common mistakes that many new long-distance landlords make, such as not hiring a local real estate agent or failing to properly research the area.
Please make sure to go over the aforementioned checklist for a long-distance landlord before you begin your venture.