Purchasing a fourplex, small apartment building or more can be an exciting investment that brings in some extra money. Whether you are looking for a way to make passive income during your retirement years or for a way to make some extra income, buying rental property can be an effective means to accomplish either goal.
However, investing in any Florida rental property is not something to take lightly. Before you take the leap, you should evaluate your risks and rewards in becoming a potential property owner. Here are several key considerations before purchasing property:
Buy in the right location
Location can determine many key elements of your rental property, including the price of rent, property taxes and more. Additionally, the location of the property can entice prospective tenants to consider the building due to its proximity to restaurants, shops, schools and more.
Your ability to take on planned and unplanned expenses
As the property owner, you will have to take on both fixed and variable expenses. While you can count on paying property taxes, insurance premiums and more, be prepared to also account for sudden, unplanned expenses. These could range from repairing broken air conditioners or water heaters to addressing flooding issues to assuming the responsibility of all costs associated with a temporarily vacant unit.
Your ability to put down a significant down payment
Many regard 20 percent to be the “gold standard” of down payments. However, homeowners can often get away with paying substantially less than this. For rental or investment properties, this is not usually the case. According to Investopedia, because rental properties do not offer the option of mortgage insurance, sellers typically require 20 percent.
Work with professionals for complex or time-consuming issues
Many property owners choose to hire a property management company to manage the day-to-day issues of the rental property. This could include collecting rent, addressing sudden maintenance issues, showing units to prospective tenants and more. If you are comfortable with paying regular fees for these services, this could potentially save you both time and energy in keeping your rental property up and running.
Additionally, working with a lawyer throughout the purchase of your rental property can help in protecting you against liability, reviewing the terms of contracts and addressing any of your key concerns.