Realtor - Amanda S. Davidson: 5 Things To Know When Buying A Rental Property

5 Things To Know When Buying A Rental Property

5 Things To Know When Buying A Rental Property

If you’re a homeowner who also wants to become a landlord there’s a lot to consider. Surprises when buying a rental property are never welcome and can often be avoided. Before you become an investor check out 5 things you need to know when buying a rental property.

 

The rental market in Northern Virginia is extremely strong and prices have been rising for over 10 years. Demand for rentals is high and millennials make up a large amount of the demand. They are often opting to rent well into their 20’s due to the high real estate prices in this area combined with student debt and older child-rearing years.

 

High demand in a desirable market like Northern Virginia creates an excellent opportunity to purchase an investment property.

 

Here’s what you should know when buying a rental property.

5 Things To Know When Buying A Rental Property


Location

Let’s say it again … location, location, location. It really is THAT important. Selecting a market with low vacancy rates and high demand should be at the top of your list when buying a rental property. It’s the simple law of supply and demand. The higher the demand and the lower supply the better. A highly sought after location will be a costly investment but, it will also mean a higher return both in the form of monthly rent and in property appreciation. As the value of your property rises you’ll be passively making money on top of the rent you’re collecting.

 

Location Part II – Walkability

When buying a rental property location isn’t just the big picture of what city to buy in. It’s also what neighborhood to buy in. Proximity to shopping, dining, entertainment, and the ever sought after public transportation should all play a role in your decision-making process. Walkability is directly attributed to a higher home value. Walkability is also a key factor to millennials looking for their next home.

 

Property Taxes

Where you buy your rental property will determine what the property taxes are. This all goes back to location too. Property taxes can vary drastically by location and this is another important factor to consider when buying a rental property.

 

For example, in Fairfax County homeowners pay $1.15 per $100 of assessed value where in Arlington County homeowners pay $1.013 per $100 of assessed value.

 

When buying a rental property you’ll want to ensure the monthly rent is high enough to factor in what you’ll owe on property taxes.

 

You need to ensure your rental property is in a location that provides a high enough monthly rent to make up for what you’ll pay in property taxes.

5 Things To Know When Buying A Rental Property


Maintenance Expenses

When you own a rental property you still have the responsibility of maintaining the property as if you were living there. Ongoing maintenance is inevitable and it could be as small as a leaky faucet to as large as replacing the HVAC. When buying a rental property pay close attention during the home inspection. This is a prime opportunity to learn about the property and understand if there are large items that are nearing the end of their useful life that will require budgeting for a replacement in the near future.

 

Depending on what type of rental property you buy your maintenance costs will vary. For example, if you purchase a single family home you will be responsible for the roof and siding. If you purchase a condo it’s not likely you will have that responsibility but, you will have a condo fee to pay each month. There are pros and cons to both.

 

Ownership of a rental property is a long-term investment and budgeting is going to be required each month regardless of what type of property you buy. Doing so will prepare you for expenses throughout the time you own the property.

 

Property Management

Will you need property management when you buy your rental property? Depending on where you’re located and where your rental property is located this might be something to consider. Your schedule and daily demands should also factor into this decision. If you live in a different state than where your rental property is located it may even be a requirement to have property management. Property management is another expense to consider when factoring your return on investment.

 

Are you ready to buy a rental property?

These certainly aren’t the only things to know when buying a rental property but, all of them should be at the top of the list of things to consider. Buying a rental property can be a very wise investment but, as with any other investment you have to do it correctly. Not every property is the right rental property investment. Enlisting the expertise of a trusted real estate agent who has experience working with investors is always wise. Do your homework and make sure you’re selecting the right property, doing so will set you up to earn a passive income for years to come.

 

Additional Resources

Converting Your Home To A Rental Property via Luke Skar of Madison Mortgage

How To Pick A Neighborhood You'll Love

 

 

 

Amanda Davidson Real Estate Group

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AMANDA DAVIDSON  
l ASSOCIATE BROKER l  
l AMANDA DAVIDSON REAL ESTATE GROUP BROKERED BY eXp REALTY l

C  703.431.3755   |   O  703.988.3151  |   W  www.amandadavidson.com

A  20130 Lakeview Center Plaza #400 Ashburn, Va 20147




Comment balloon 63 commentsAmanda S. Davidson • May 26 2019 06:00PM

Comments

These are such great tips!  Buying a rental property is more than just buying a home, it has to be evaluated differently to make sure it is a good investment.

Posted by Brian England, MBA, GRI, REALTOR® Real Estate in East Valley AZ (Arizona Focus Realty) 6 months ago

Hi Amanda... an excellent post. I've worked with many a buyer who thought buying an investment property was simple... they quickly found out that there were lots of things to think about and factor into a buying decision.

Posted by Nina Hollander, Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor (Coldwell Banker Residential Brokerage ) 6 months ago

Hi Amanda, buying a rental property is one thing and being a landlord is another. Investors need to really think about this and you provide excellent tips for investors to think about. 

Posted by Rebecca Gaujot, Realtor®, Lewisburg WV, the go to agent for all real estate (Vision Quest Realty) 6 months ago

Happy Monday Amanda, Excellent points about rental property that investors should know about.  If it okay with you I like to reblog this sometime.

 

Posted by Will Hamm, "Where There's a Will, There's a Way!" (Hamm Homes) 6 months ago

Hello Amanda - your "reality" check for potential landlords is a useful guide:  before and as you start the process of purchasing.  After-the-fact too.  

Posted by Michael Jacobs, Los Angeles Pasadena 818.516.4393 6 months ago

Good afternoon Amanda - your information is very important and the link as well.  People buying investment property will need to know all the costs and maintence requirements.

Posted by Grant Schneider, Your Coach Helping You Create Successful Outcomes (Performance Development Strategies) 6 months ago

Hi Amanda S. Davidson - Nice Job! Very astute observation and advice for those looking to buy a rental property. Your clients are very lucky to have you and be able to ask questions. They will get accurate advice that can help them save money in a future purchase. 

Posted by Sheri Sperry - MCNE®, (928) 274-7355 ~ YOUR Solutions REALTOR® (Coldwell Banker Residential Brokerage) 6 months ago

Yes Amanda. You ALWAYS need money for unavoidable mishaps that can happen with a rental property. We learned this the hard way when pipes broke in the middle of winter!

Posted by Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400, Long Island Home and Condo Specialists (The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803) 6 months ago

Brian England I completely agree! It shouldn't be an emotional purchase when it's time to make an investment. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Nina Hollander I have no doubt you helped them navigate all the details they need to consider. Far from simple!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Rebecca Gaujot, Realtor® I remember years ago I had someone who thought being a landlord was easy money. To this day he laughs about how naive he was. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Will Hamm thank you! Of course, please feel free to share it. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Michael Jacobs thank you! As with so many things, it might look simple on the surface but ... :) 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Grant Schneider thank you. They sure do, there's no way around maintenance and all too often landlords don't set money aside to account for it.

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Sheri Sperry - MCNE® thank you! Your comments are always so supportive and kind. I appreciate you!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400 no! Horrible timing and not the way anyone wants to learn about having money set aside. I cannot imagine what a mess that was. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Amanda, great tips for want-to-be investors, and what they should be looking out for! 

Posted by Joan Cox, Denver Real Estate - Selling One Home at a Time (House to Home, Inc. - Denver Real Estate - 720-231-6373) 6 months ago

Amanda excellent post to educate first time investors into the rental market, here in Los Angeles you also need to know where the "rent control" units are, Endre

Posted by Endre Barath, Jr., Realtor - Los Angeles Home Sales 310.486.1002 (Berkshire Hathaway HomeServices) 6 months ago

Excellent points...there are even some "seasoned investors" that sometimes don't check all these boxes !

Posted by Sally K. & David L. Hanson, WI Realtors - Luxury - Divorce (EXP Realty 414-525-0563) 6 months ago

So often I do an inspection on a house for someone and the agent calls me to ask for a discount on my inspection fee because the couple is "right on the edge" of their finances.  If they can't afford an inspection they can't afford the variable costs that come with buying a house, and its inevitable emergencies.

Posted by Jay Markanich, Home Inspector - servicing all Northern Virginia (Jay Markanich Real Estate Inspections, LLC) 6 months ago

Joan Cox thank you!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Endre Barath, Jr. I imagine that's a big factor to consider in LA! Just goes to show you're the local expert and knows the ends and outs of your area.

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Sally K. & David L. Hanson thank you!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Jay Markanich oh my! That is a recipe for disaster. You're exactly right, if they can't afford an inspection they shouldn't be buying a house. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Gee, AR tells me you "tagged" me in a comment.  Does that make me it?

Posted by Jay Markanich, Home Inspector - servicing all Northern Virginia (Jay Markanich Real Estate Inspections, LLC) 6 months ago

L3 is important and the corridor of the location is another key to consider. Buying a rental near a destination location could result in excellent ROI when redevelopment occurs or if the zone changes from residential to commercial. Certainly rent control must be analyzed when considering any rental investment. Great post. 

Posted by Kimo Jarrett, Pro Lifestyle Solutions (WikiWiki Realty) 6 months ago

Thanks for your post, very good information

Posted by Ron Aguilar, Mortgage & Real Estate Advisor since 1995 (Continental Mortgage) 6 months ago

Jay Markanich it does in my book! =)

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Kimo Jarrett all great points and I completely agree. Thank you!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Ron Aguilar thank you!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Hi Amanda - I was asked to speak at a real estate investors group.  They wanted me to talk about goal setting.  You certainly must have a plan.

Posted by Grant Schneider, Your Coach Helping You Create Successful Outcomes (Performance Development Strategies) 6 months ago

Grant Schneider I wish I could attend, I know you'll share valuable insight. You know so much and always learn from your posts. My Grandfather developed a neighborhood about 15 minutes from where I live many many years ago and it's because of him and my Dad that I have always had a plan. Very blessed to have guidance.

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

When checking off the boxes property taxes are a big one when factoring in whether the property will cash flow and not be a negative investment.  While the home is appreciating every year, this is passive income and cannot pay the bills.  What about the tax advantages in an investment property?

Posted by Susan McCall, Independent Listing and Buyer Agent, Bringing buyers and sellers together! (Compass Realty Solutions) 6 months ago

Great primer for anyone thinking about an investment property.   My market is so rural that very few properties offer walkability.      It's always interesting to read about other marketplaces!   

Posted by M.C. Dwyer, MC Dwyer-Santa Cruz Mountains Property Specialist (Century 21 Showcase REALTORs) 6 months ago

M.C. Dwyer thank you for stopping by! Wishing you a great weekend. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Great info for those who want to become landlords. They should be prepared and your have given them a great starting point.

Thanks for sharing.

Posted by John Wiley, Lee County, FL, ECO Broker, GRI, SRES,GREEN,PSA (Right Move Real Estate Group- EXP Realty) 6 months ago

John Wiley thank you for stopping by. Have a great weekend!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Excellent post Amanda... I also wrote a similar one recently: A Strategy for Buying Your First Rental Property in Manhattan or Miami

Posted by Ricardo Mello, Manhattan & Miami Real Estate Agent (Manhattan Miami Real Estate) 6 months ago

Amanda: Excellent advice on buying a rental property. Knowing the key details will help consumers from purchasing the wrong property.

Posted by Anita Clark, Realtor - Homes for Sale in Warner Robins GA (ColdwellBanker SSK Realtors ~ 478.960.8055) 6 months ago

Hi Amanda:

This is all excellent advice and key items ANY would-be investor should consider. The financials, which impact in a number of ways - purchase, maintenance, rent, expenses -are especially important to bear in mind. One should also investigate the tax consequences as part of the due diligence.

Congrats on a well-deserved feature.

Jeff

Posted by Jeff Dowler, CRS, The Southern California Relocation Dude (Solutions Real Estate ) 6 months ago

I can agree with everything here but the direct correlatioin between walkability and the value of a home. For instance a home outside the city with 5 acres suitable for horses in our area rents well and values well. Also in cities that are spread out and car oriented whilke having great road systems also negate that issue. In some areas u=yes, but it is not universal in my opinion.

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) 6 months ago

Walk-ability is not a big consideration in our multi unit rental property market. The condition of the roof, heating system, the neighboring property conditions and is the entire area all renters, no home owners, etc. How long the tenants have been on board, how they take care of the premises and are the rents in line with the market... all of these considerations means hire a local real estate professional that is savvy and has lots of listings, sales of MULTI UNIT RENTALS... That's what it takes Amanda S. Davidson !

Posted by Andrew Mooers | 207.532.6573, Northern Maine Real Estate-Aroostook County Broker (MOOERS REALTY) 6 months ago

All good tips Amanda.  I would agree with Andy above me.  Walkability not a huge factor here in my area of Tennessee.

Posted by Cindy Edwards, CRS, GRI, PMN - Northeast Tennessee - 423-677-6677 (RE/MAX Checkmate) 6 months ago

Excellent post! Very well written and thought out. I do believe in rentals as a way to invest in your future. You have explained many of the most important aspects of where to start. 

Posted by Debra Leisek ( Bay Realty,Inc Homer Alaska) 6 months ago

All good points. I would add one more - "suitability."

Do you have patience, flexibility and stomach to deal with the surprises that can pop up when that (hopefully) rare bad tenant stops paying rent, destroys your property or just is a general nuisance.

Owning property and being a landlord can be a very lucrative investment. I know because I am. But, if it were so very easy - everyone would be a landlord.

Posted by Warren Schutt, Helping People with Their Moves for over 36 Years (Warren Schutt Real Estate) 6 months ago

Hi Amanda, great tips for home buyers to consider before buying a rental property. It can be costly if you don't do your due diligence ahead of time. Have a great week!

Posted by Matthew Klinowski, PA, Golf Community Real Estate Specialist (Downing-Frye) 6 months ago

This is a great starter list for would be investors.  

Posted by June Piper-Brandon, Piecing Dreams One Home at a Time (Long & Foster Hampden) 6 months ago

All very good point to keep in mind. Been around point of interest, like colleges, hospitals etcis also a way to reduce the vacancy. Thank you for sharing.

Posted by AndreaBFerreira CRS - SRS - CLHMS, Miami Dade, Broward and Palm Beach County in FL (Keyes Co. ) 6 months ago

Ricardo Mello you did a great job on your post. Thanks for stopping by. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Anita Clark thank you!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Jeff Dowler, CRS I agree, a lot of times the numbers just don't make sense but, until they're run in detail one wouldn't know. Thank you for your comment.

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Joe Pryor I don't disagree with you in the slightest. In Northern VA it's a must but, every area is of course different. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Andrew Mooers | 207.532.6573 you perfectly illustrate why working with an agent who knows the intricacies of the local market is a must. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Cindy Edwards that's one that definitely varies by area, in Northern VA it's a must but, I understand in other areas it's not. Thanks for stopping by!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Debra Leisek I think it is too, it's not easy but, it is a solid way to build long term wealth. Thank you for your comment!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Warren Schutt you're right, there is nothing easy about it! Worth it but, not easy. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Matthew Klinowski, PA it sure can! You said it best - due diligence. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

June Piper-Brandon thank you. 

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Andrea.B Ferreira 954-303-8289 CRS great point to add, thank you!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 6 months ago

Amanda S. Davidson - These are all excellent tips and this blog post is a keeper for prospective tenants. You are one of the wisest brokers in the North East. It would be an honor and a privilege to meet you one day or do business together.

Today, tomorrow, and always I wish you the sky and moon!

Posted by Patricia Feager, MBA, CRS, GRI,MRP, Selling Homes Changing Lives (DFW FINE PROPERTIES) 5 months ago

Dear Amanda,

Working with a Realtor, who handles rentals can be very helpful. Sometimes neighborhoods next to each other have quite different rental profiles. Good to research the details before spending your hard-earned money. Getting a 6% return or an 11% return can make a huge difference over the next 20 years or more that you might own the place.

Posted by Dörte Engel, ABC - Annapolis, Bowie, Crofton & rest of Maryland (RE/MAX Leading Edge) 5 months ago

Patricia Feager, MBA, CRS, GRI,MRP thank you so very much. I hope it helps at least one person who is diving into investing in real estate. I truly appreciate your compliment, it means the world to me. It would be an honor and privilege to meet YOU. You're such a class act and one of the most genuine people I know. We'd have the smoothest transaction if we joined forces!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 5 months ago

Dorte, your comment is perfectly stated. Such a huge difference and well worth the time it takes to connect with an agent who knows the intricacies of different neighborhoods. Thank you for adding to this post!

Posted by Amanda S. Davidson, Alexandria Virginia Homes For Sale (Amanda Davidson Real Estate Group Brokered By eXp Realty) 5 months ago

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