Tips When Buying Rental Property
If you are thinking about buying property to rent to others, or maybe you already have several properties that you rent to others, here are a few tips to look at for before you purchase your next property. The key to rental properties is making sure they cash flow. If you buy a property that has a big expense upfront, you are going to be in the hole for a while.
The first thing to consider is the age and/or condition of the roof. If you are looking at buying a new rental property, its important to make sure the integrity of the roof is in good shape. If there appear to be shingles that have started to lift, or if you know the roof is older than 20 years, it doesn’t matter what kind of roof that was originally installed. There is a high probability that in the next 5 years, you could have roof issues. That’s something that you do not want to replace in the first 5 years of a new purchase because it zaps your cash flow. If it’s a shingle roof, make sure its newer than 20 years and there are no signs of lifting. Metal roofs typically do hold up better in the long run. You typically don’t have to worry about lifting on the panels.
Heating and Air Units
The second thing to consider before purchasing a rental property is the heating and air units. Even on smaller units that are 1.5 ton, you could still be looking at nearly $4,000 to replace them. If the units are pushing 20 years old, then it could be possible they need to be replaced in the next 5 years as well. Again, you don’t want to purchase a new rental property and have your cash flow depleted due to one of the units going down. You should be able to get the age of the unit from the realtor or current property owner.
If you don’t feel comfortable making these calls on your own, you can always contact a local roofer or HVAC contractor to come and look at it for you. They may charge a small fee, but it would be worth while to pay a small fee for an inspection than to be out several thousands of dollars.
Here’s another good thing about knowing the age of the roof and heating/air conditioning units, it can actually help out on your insurance premiums. The newer the roof and newer the updates the better the discounts on your property insurance. If you already own property and have made these updates, you need to contact your agent to let them know. It could save you a few hundred dollars on the year.
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