So far, 2020 has not been a great year for landlords. With millions of people newly unemployed, the monthly collection of rent has become an if rather than a when. A number of landlords have even been evicted from their own homes due to a lack of income.
This is obviously a major crisis that has few upsides. However, if you have a high appetite for risk, it also provides some opportunities. Many landlords are desperate to get properties off their hands, whether because they have had to evict tenants or simply cannot find any potential renters.
In other words, you can get property at a low price, but with the understanding that rent is not guaranteed for the next few months.
If you are going to try your hand in the real estate market, there are a number of precautions you need to take. And to help you with finding the best possible deals in the current climate, be sure to ask about these extras.
Home warranties
Many new landlords make the dire mistake of calculating rent prices against their mortgage. They charge an excess that will, in theory, make up a good income. Unfortunately, they fail to realize just how expensive owning property can get.
Maintenance is not something that needs to be attended to every few years. It can be a monthly expense. Alternatively, over the course of a year, it adds up to what amounts to a high monthly rate. When living in a home, most homeowners don't do the calculations, but when it affects your income, you cannot neglect it.
This is why home warranties are a good idea for landlords. A good home warranty will pay for most home maintenance needs. Furthermore, it gives you a fixed monthly rate that you can include in your calculations of what you should charge tenants.
There are a number of home warranty review sites, such as ReviewHomeWarranties, where you can find the best warranties available in the US. Take a look if you are in the process of purchasing a property.
What is the house missing?
Especially in the current real estate climate, it is a mistake to see an asking price as a fixed sum. Sellers are more than willing to negotiate if they think you are serious about buying. For some, selling the property is an urgent need rather than an idea.
When seeing a potential property, you should therefore ask about any deficiencies. Anything the house is lacking that you will need to lay out money for.
For example, if the insulation is not up to scratch, you are going to have to spend a fair amount of cash on getting it fixed or installed. Find out before you put in an offer, and consider subtracting that from what you are willing to pay.
Prepaid utilities
When purchasing a property to rent out, utilities should be something you seriously consider. Many landlords work the cost of electricity and water into the price of rent, and end up regretting it when the tenants rack up a much higher bill.
Ask about prepaid options to install in the house. Prepaid utilities puts the onus on the tenant to pay. You do not need to account for it in the rent, and your asking price therefore becomes more attractive. When they do go far beyond what you had hoped they'd spend, it does not hurt your income.
In the current real estate climate, purchasing properties is both a risk and opportunity. Do what it takes to get the best deals possible, so that your income from rent is unencumbered by unnecessary expenses.
