Q: I have recently retired and am considering purchasing rental property to supplement my income. What advice can you give me?
A: Rental property is a great investment and this is a great time to start looking. Navigating through the process of buying right now gives you the freedom to make changes during the off season. By the next peak season you will be ready to reap the benefits of that added income while you enjoy Lake of the Ozarks.
Before looking at every piece of property on the market you should decide on what aspect of the market you are best suited. For instance, if your niche is carpentry or preservation, you may consider buying a fixer upper. If your area of expertise leans more toward fnance or accounting you may feel you are best suited to begin with a small apartment building or commercial structure.
As with any real estate purchase you will want to have the assistance of an experienced realtor. A comparative market anaylsis should be performed and with rental property you will want to compare the rental ratings in that area as well. Something to keep in mind is that lower residential rental rates are not necessarily a negative aspect. A renter who can afford high rent can most likely afford to buy a home. A steady rental income may be more difficult to maintain if your renters are opting to buy and terminating their lease.
Think of your investment as a business whether it is commercial, an apartment building or a fixer upper and investigate accordingly. Operating expenses, loan payments, utility costs, vacancy costs, taxes and insurance are all figures you will need to compile along with the current or expected rent to complete a cash flow chart. Take the time to become familiar with every financial aspect of your proposed investment.
The tenants of rental property are your customers in this business venture. If you are considering a property that includes existing tenants you will want to gather as much information as possible about them. Pay special attention to the terms of the current lease. Is this a long term or short term lease? What are the provisions in the lease for termination by either party? What are the specific responsibilities of each party in the current lease? The answers to these questions should give you a more precise picture of the financial stability of this investment.
If you are considering a property that is not currently used as rental property you will want to research your potential customer base or tenants. The use of demographic information in the area such as average income and the number of renters versus homeowners can be very helpful. The comparison of rental rates in the area, as mentioned earlier, will also be essential in determining whether this is a viable investment.
This is a substantial investment and one that should not be entered into lightly. An experienced realtor can be a great asset in this business venture. A realtor can help locate the investment that is right for you and direct you to other professionals who can help you to complete your research and final analysis of the investment. Utilize the professionals to assist you in gathering all of the information you need to make an informed decision.
Please send us an email with any questions regarding investment property or Lake of the Ozarks real estate in general.