If you’ve been going back and forth on buying a rental property, here’s the case for doing it. A rental can give you regular income, a valuable asset to sell later, and a fallback place to live if you ever need one. It also comes with real work, which we’ll get to.
1. Regular income
This is the reason most people become landlords. Once a property is rented, money comes in every month whether or not you went to work that day.
It isn’t entirely hands-off. Appliances fail, roofs leak and tenants move out. But much of that can be handed to a property manager, and a well-kept property with good tenants doesn’t ask much of you day to day. If the numbers are right, the rent covers the mortgage and expenses with something left over. For more on keeping that income steady, see our tips for retaining tenants.
2. A gain when you sell
Every rent payment that goes toward the mortgage builds your equity. After enough years, your tenants have paid down most or all of the loan, and what you sell the property for is largely yours to keep.
Ideally the property rises in value over that time too. If the market is soft when you’d like to sell, you can wait. As long as the rent keeps coming in, there’s no pressure to accept a low offer.
3. A place to live if you need it
You have to honor any lease that’s in place. But if you rent by the room, or a unit comes vacant, you have somewhere to go if your own circumstances change. Most landlords never use that option. It’s still reassuring to have.
What to weigh before you buy
A rental is a business, and it helps to go in clear-eyed:
- Set aside money for repairs and for months when a unit is empty
- Learn the landlord-tenant rules in your state
- Run the numbers on realistic rents, not hopeful ones
- Decide early whether you’ll manage it yourself
Financing your first rental
Many investors buy a property that needs work, renovate it, then rent it out or refinance into long-term financing. A short-term loan can cover the purchase and renovation stage. Sachem Lending offers hard money loans for new and experienced investors, including bridge and value-add loans. If you’d like to talk about a property, contact us.
