Seven Things to Know Before Investing in Rental Property

Now can be a good time to be a landlord

RealEstateHomeownershipEXCFor potential investors who have good credit, savings, and a dose of patience, the time is ripe for being a landlord. Like many potential real estate investors these days, you may be worried that the national trend toward declining property values might crimp your ability to draw income from rental property.

The housing bust, however, is actually working in favor of new landlords on two important fronts. First, as everyone knows, homes are getting less expensive. Since prices reached a high in the summer of 2006, average prices for homes of all kinds—single family, multi-family, condominiums, and the like—have fallen 22.8%, according to the National Association of Realtors (NAR).

At the same time, however, because many consumers are skittish about becoming homeowners in the current environment, apartments and other rental properties have remained in high demand. As a result, national average rents have been steadily increasing, seeing rises of 4.1%, 3.1%, and 2.9% in 2006, 2007, and 2008. Average rents are expected to decline roughly 1.5% in 2009, then increase less than 1% in 2010, according to NAR projections.

All told, those numbers paint a rosy landscape for potential landlords. But, as with any major purchase, the first step is to investigate your purchase before jumping in.

Experts say there are a number of things to consider when buying investment real estate:

Determine how much you can afford to invest. Get preapproved by a financial institution that has worked with investors.

Know your criteria. Find out what types of properties rent best in the area you want to invest, whether it’s a townhome, condo, single family home, two bedrooms, or three bedrooms.

Pick the right agent. Select a real estate agent who has experience working with landlords. They’re best equipped to help you identify properties that meet your goals.

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