Tips for a future Landlord

August 25, 2008 · Ester Posillico · (650) 871-3665

Wow…have you seen the prices of Real Estate lately? The home prices are at a low, as well as interest rates, making home buying much more affordable. It this the right time to go out and buy a home as an investment? Quite possibly. Let me break down some pros and cons of buying investment property.

Advantages:

You have a tangible asset, you can do with it whatever you want. Paint it, remodel it, enjoy it. You can even get mad at it if you want, but why would you? After all it is yours!
Rent is income. You can actually make money by having someone else pay your mortgage. With the investment of a down payment a property can actually be paying itself off as well as provide extra income for the owner.
It appreciates. Over time it is an investement that goes up in value. At times not as quickly as we would like but it does if you look at it as a long term investment. Eventually the house may become a nice money maker because from the equity of one house the investor may be able to buy another one, and so on.
You have Tax advantages. Did you know that you can avoid paying taxes on the sale of an investment property if you sell it and then purchase another rental? (Check with your accountant to see how the numbers will work for you.)

Disadvantages

Liability. It is a good idea to have your property well maintained and up to code to protect yourself from possible lawsuits.
Unexpected Expenses. Just like a personal residence, a rental does need to be maintained, and with that money does have to come out of pocket.
Bad Tenants. Although it is investment property, and a great way to get income on it, there are times when the tenants don’t do their part and don’t pay rent. An attorney may be necessary, and money may be lost.
Vacancy. Unfortunately at times the property does not have a tenant and the landlord does have to make necessary repairs to get the house ready to be up for rent.

Having property is great! It has many advantages and some disadvantages, but if you are well informed when you purchase the property you may very well minimize the risks and have it all work in your favor. Talk to your realtor, learn about your prospective property, and enjoy another asset.

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