While pulling in a national average salary of over $70,000 a year according to ZipRecruiter, landlords have shown that rental properties provide many with the financial freedom that typical jobs do not. Aside from passive income, investing in real estate also comes with numerous tax benefits and greater security. Learn more about the smart steps to take when investing in your first rental property.
Are You Ready to Be a Landlord?
When investing in residential property, it’s important to understand the responsibilities that come with managing a property. Aside from the mortgage payments and maintenance costs, your relationship with tenants can make or break your experience as an investor. If you feel confident managing the property on your own, be prepared to work. As a landlord, your tenants will expect you to complete any legal agreements, maintenance, and repairs. Meeting their expectations with consistent upkeep and communication is vital in supporting a beneficial landlord-tenant dynamic.
If you are looking to invest in multiple properties in the future, hiring a property manager to provide residential services for your tenants may be helpful. Property managers will have more time and resources to establish relationships with tenants and provide maintenance work. This relationship is essential in attracting responsible tenants that plan on renting long-term.
Calculate Your Expenses and Profit
Many first-time investors want to know how much money they could potentially make out of a single property. You can calculate the return on investment (ROI) to see exactly how much your rental can profit. First, find out the property’s net annual income—any rent money left after paying taxes, insurance, expected repairs, utilities, and any other fees the tenants will not cover. Next, you will find the ROI by dividing the net annual income by the amount you have invested in the property. For example, if your total annual income is $9,000 and you spent $110,000, your ROI is 8.1%.
Preparing for unexpected expenses and operating costs such as a busted pipe or broken door will help keep you in the safe zone when it comes to profiting from your property.
Know Your Landlord-Tenant Laws
There are legal obligations that also come with being a rental owner. In Tennessee, there are specific laws that dictate your rights as an investor as well as your tenants’ rights. You should thoroughly review how to properly handle security deposits, lease requirements, fair housing, and all other legalities involved to avoid any legal troubles in the future.
If you are considering investing in a real estate property, our experienced team at HND Realty LLC is ready to help guide you through your purchase. New homes built by HND Realty in Nashville and the surrounding community are equipped with functional architectural designs that your tenants will surely admire. Schedule an appointment today with one of our dedicated real estate agents and learn more about investing in your first rental property.