You may already own rental property in Seattle, or perhaps you’re thinking of taking the leap and investing in a Seattle home to rent. Whatever stage you’re at in your journey you need to carefully consider your next step. Investing in property can be a positive choice for your bottom line, and it can also be a lot of work. How will you manage your money and time to get the best outcome from your investment?
What to Consider When You Invest in Rental Property
Investing in rentals isn’t just about buying the right properties, it also involves on-going responsibilities. Even if you have the funds to buy great properties outright, you need to consider whether this job is the right choice for you.
- Do you enjoy working with people? Property management is just as much about people as it is about the property. You’ll need to continually work to find and secure tenants.
- Is marketing a strength for you? You will need to market your properties so that you can find new tenants.
- Can you set strong boundaries? Your tenants need to know the rules around pets, landscaping care, late fees, and a number of other things. You will need to establish those rules and enforce them.
- How are your financial management skills? You’ll need to juggle mortgage payments and tenant rental fees and consider how much maintenance you need to put into each property.
- You’ll need to work with others, such as landscapers and contractors. Even if you’re handy around the house, inevitably there will come a time when you don’t have the time or skill to accomplish a necessary home maintenance task.
- How available are you to deal with problems that arise at your properties? Whether a tenant has a barking dog or there’s a plumbing leak at midnight, are you prepared to deal with these situations?
Being a rental property owner involves a lot of business management, problem-solving, and conflict resolution skills. Are you ready to take on the built-in challenges of managing the properties you invest in?
Finding the Right Properties
When you’re investing in Seattle rentals, how do you decide what properties are the best investments?
- Look at the home as an investment. Does it need a lot of repairs? How many bedrooms and bathrooms does it have? What is the yard like? Is it in a good location within the neighborhood? Look for home assets that will be easy to maintain and naturally attractive to tenants.
- You need to look at the neighborhood. Does it add value to your property? A safe neighborhood with excellent amenities and transportation connections is a draw in itself, and this allows you to charge higher rent. Consider the history of the local area to see if a neighborhood is becoming more attractive to tenants.
- Can you buy a home in that neighborhood? According to Forbes, “if you’re competing in an area where most investors own their properties outright without a mortgage while you do have mortgage expenses to contend with, you have less pricing flexibility than your competitors have.”
- What do you need to charge to make money on your rental property? Take into account all the extras that you’ll need to cover, such as initial repairs as well as on-going maintenance costs. Gauge whether or not your mortgage payment and all of those extras will lead to a reasonable rental price, or whether you’ll have to price your rental on the higher end of the market just to make ends meet.
Making the Numbers Work
If you’ve balanced the books correctly, then the payments that you have coming in from rent should be more than the mortgage payment that you need to make on a property. However, scaling up means that you need to be more and more financially diligent.
- Transaction fees. According to Landlordology, when you purchase a new property, you need to “factor in additional costs such as tax, legal fees, stamp duty, etc.”
- Maintenance. Properties can be expensive to maintain, especially if you have too many to do the maintenance yourself. If you’re hiring a landscaper to visit your properties, how much will this cost? What about the costs of seasonal HVAC inspections or annual gutter cleaning?
- Repairs. How much will it cost to replace the water heater or repair or replace the roof on that home? You’ll need to plan for both minor and major repairs.
- Marketing. How will you let others know about your properties? You can do this by word of mouth, but you may also need a website, listings, and an advertising budget.
- Rental gaps and glitches. Every time you need to find new tenants, there’s the possibility that rent will not come in that month. You’ll need to budget for these gaps as well.
The investment of your time is a huge consideration when investing in additional properties. Your time is valuable, and spending more and more time managing your property portfolio can become a full-time job. If you don’t want a new job, you could think about hiring a property management company that will manage all of the tasks above, and more. With a property management company, you can focus on being a property owner/investor instead of a property manager.
Are you thinking of investing in Seattle rentals? Lori Gill and Associates is here to help you manage your growing portfolio. We’ll help you find new tenants, coordinate move-in and move-out, and organize and maintain your properties. Connect with us today.