Secrets You Should Know Before You Buy A Rental Property

Are you looking to purchase a rental propertyThere are certain things you need to know in order to be successful. In this business you make money when you buy. Therefore arming yourself with knowledge before you begin will give you a better chance of being successful. I am writing this article to ensure you make a solid investment.

What do you need to know before you buy?

There are many questions that need to be considered that determine whether you are making a wise investment. They range from where to buy to saving taxes on the investment. If you are doing this for the first time, here are some things to think about before you start.

· Location – The better the neighborhood the more rent you can collect and the better the chances of your tenants paying on times.You can buy in lower income neighborhoods but try to look at areas that are stable and improving. Look for properties that are close to hospitals, schools and parks. A really good investment is to find properties near universities. You can make a lot of money by renting single rooms out.

· Home Inspection – A home you are viewing may look great on the exterior, but may have underlying problems. Getting a home inspection can save you thousands in the future because a home inspector may root out hidden problems in the property such as structural damage, mold or plumbing & electrical problems. A few hundred dollars spent on a qualified home inspector is well worth the expense.

· Do your due diligence – Study up on your local housing regulations. Make sure the property complies with zoning and fire codes. Make sure all work was done with proper permits. If you buy the property and then find out it is not up to code, you will be responsible for the required changes. This can be costly.

· Taxes – Consider acquiring your rental property through a tax-deferred 1031 exchange to avoid paying capital gains tax on the appreciated values. This can be a complex process so make sure to hire a competent attorney or tax advisor who has experience in this area.

· Cash Flow – If you want guaranteed positive cash flow, consider buying properties in modest neighborhoods. If you are buying income producing properties make sure they have favorable balance sheets. Make sure you see the P&L statements for the past 2 years.

No investment is ever a sure thing. There are no guarantees. However, arming yourself with knowledge and asking the right questions before you buy will definitely lower your risk.

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