The Time is Right for Buying Rental Properties
Among the unique attributes of today’s housing market recovery has been the large share of homes snapped up by investors. Across the Bay Area, real estate investors account for 30 to 40 percent of the homes purchased in recent months, attracted by a ready supply of bargain-priced properties.
Many of these investors are multimillion-dollar corporations, but there are plenty of individuals and couples, too, who have acquired a second or third home with plans to build equity while using rental income to pay their mortgages.
If the idea of becoming a landlord seems attractive, you should move quickly. Home prices have been rising gradually for almost a year and will soon reach pre-2007 levels, ending the price advantage that currently favors buyers.
There are dozens, if not hundreds, of websites offering advice to would-be landlords. Here are a few links that we’ve found to be useful:
Investopedia, a respected name in online financial advice, discusses many pros and cons of renting in an article titled “Tips for the Prosepective Landlord.” It’s a good place to begin your research.
One of our favorite sections of the Investopedia article is its explanation of real estate as a tangible asset: “You can paint it when you’re happy with it and throw rocks at it when you’re not. Shares of Enron, by contrast, are much harder to hit with a stone.”
Owning a rental property presents many tax advantages, and an article on the Nolo Press website, “Top Ten Tax Deductions for Landlords,” explains them in clear language.
The Nolo site has another useful article, “Alternatives to Selling: Becoming a Landlord.” Also, take the time to explore other elements of the site. Nolo is a Bay Area nonprofit that has earned a national reputation for its self-help legal advice. Four books advertised on the site look especially useful: “Every Landlord’s Legal Guide,” “Every Landlord’s Tax Deduction Guide,” “Leases & Rental Agreements,” and “Fixed-Term Residential Leases.”
Another article that explores the intricacies of tax law for landlords is “So You Want to Be a Landlord” from The Wall Street Journal’s SmartMoney.com.
Once you’ve got a rental property, you might feel overwhelmed by the responsibilities of maintaining the site and dealing with tenants. A property management company can help, whether you have a single property or 100.
There are many property management companies to choose from in the Bay Area, including our own, Pacific Union Property Management. We can help maintain your rental units and find desirable tenants, as well as assist in rent collection and accounting.
Lastly, for a thorough primer on the many aspects of owning a rental property and dealing with tenants, go to the website of the California Department of Consumer Affairs.
The agency offers a 122-page book, “California Tenants: A Guide to Residential Tenants’ and Landlords’ Rights and Responsibilities,” available for viewing online and downloadable as a PDF file. A sampling of chapter titles includes “Who Is a Landlord and Who Is a Tenant,” “Unlawful Discrimination,” “Dealing With Problems,” “The Eviction Process,” and “Resolving Problems.”
Once you’ve decided to take the plunge, a guide such as this one may do more than any other single source to help you enjoy your new career as a landlord for many years to come.
(For-rent photo courtesy of Hownowdesign, via Flickr.)