Important Tips When Buying Your First Inland Empire Rental Property
The rental real estate market is taking off here in the Inland Empire, and across California. It’s a great time to purchase rental property, and you’ll be able to start making money almost immediately – but there are several hurdles to clear before it can happen. Property rental is also a complicated field, and mistakes can quickly derail an investment project.
At the LaBrada Group, we specialize in making Inland Empire real estate management easy. Here are a few key tips for smoothly joining the field.
Four Tips for Your First Inland Empire Rental Property Purchase
1 – Have a significant down payment ready
Lending standards are much stricter when you’re looking to purchase property for rental. Don’t expect highly forgiving mortgage rates or low down payments. In general, assume you’ll need anywhere from a 15% to 25% down payment, depending on your company’s existing credit history. Typically, a FICO score of 620 will be the bare minimum, and you’ll need 740+ to get decent rates.
2 – Have more money in reserve
Even with a good property management company by your side, it’s going to take some time to fill out your new rental property. We strongly advise you to have enough liquid funds on hand to cover anywhere from 3-6 months of mortgage payments, so you have time to build your cash flow.
3 – Be prepared for high operating expenses
Maintaining a rental property up to legal standards (not to mention keeping it attractive to tenants) is not cheap. Typically, the operating expenses of a property will take up at least 40% of its income, potentially up to 80%. Adjust your rental rates accordingly. If you’re buying an existing property, you’ll be able to see its existing financials to make your choices.
When in doubt, a good rule of thumb is to charge twice as much in rent as it costs to regularly maintain the property.
4 – Study the law
As a landlord, you will be expected to comply with numerous regulations, ranging from non-discrimination policies in renting, to maintaining health and safety on your property. While the day-to-day work can be handed off to a property management company, you should still be familiar with the laws regulating your property. This helps keep you from being caught off-guard by legal issues.
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