The Fall is officially here in New Jersey. The leaves are turning a million shades of orange and falling all over your yard. & The Yankees are in the playoffs and the Jets and Giants are well into their season. Oh right, and the kids are back at school! In thinking about what to write about this month I looked around at what was happening and what people may be curious about in today’s market and I came up with rentals. With home values down and mortgages harder to get there are many great reasons to be in the rental market. This applies to people not only looking to rent but those looking for properties to purchase and rent out. Below I will detail some of the reasons you would want to be a tenant or a landlord as well as give some advice on what you should be mindful of before you do anything.
Why Would You Want to Rent?
The main reason people rent in any market is because they don’t have the money for a down payment. Typically to purchase a home you need at least 10% of the purchase price to use as a down payment. Add in closing costs which could run around $8,000 and the numbers could be intimidating. Consider a $350,000 home.
10% X $350,000= $35,000 + $8,000 = $43,000 initial investment
To many people that number can be too much so renting is the most viable option. Another main reason people are looking to rent is bad credit. Credit card bills? Defaulted on a loan? No credit history? All of these can make it difficult to buy and unfortunately this affects millions of Americans in 2012. There are many reasons people look to rent but these two account for much of the increase in renters in the current market.
What Should Know Before Looking for a Rental?
· If you are going to use a Realtor or look at listings on MLS then you should expect to pay a Realtor fee. Realtor fee is typically 1 month’s rent.
· You will usually have to pay a security deposit not to exceed 1.5 month’s rent.
· Your first month’s rent will be due at lease signing.
· Landlords cannot discriminate against race, age, nationality, marital status, handicap, etc unless it is a 2 family that is owner occupied.
· Landlord may ask for a credit check but should only turn you down because of your inability to pay your rent.
· Landlord may ask for proof of employment, references, proof of income, and rental history
This is only a short list of things to expect so please call me to discuss the rental process and what else you should expect.
Looking to Invest in a Rental Property?
Entering the investment market is a great idea right now for many reasons. First is home prices continue to be low as the recovery has really only leveled prices at this point. You can buy a lot more for your money than you could a few years ago so many people are looking at homes they can buy fairly cheap and rent them. That doesn’t mean you need to look at low income homes, just that you need to get a home at a good price so the rent can cover or come close to covering your expenses (mortgage, insurance, taxes, other expenses). The second great reason to invest is thet mortgage rates are still hovering around record lows. These two factors have created a bustling investment market that can help you build wealth. Simply put: You purchase a home and have a renter cover the mortgage. Every month you add equity to the home eventually covering your initial investment. When it is time to sell the home you take out the equity and enjoy the profit. Yes there are risks involved every time you invest so I am not saying this is a guaranteed get rich plan. What I am saying though is that if you are a smart investor, buy the right home, find the right renters, and take care of your investment you can create wealth.
What should you expect as a landlord? Read my outline that will give you all of the information you need to know before becoming a landlord.