It’s no secret that Central Florida is a hot spot for second homes and rental properties. If you’re ready to take on an investment property, it’s important to understand that it can be risky but also rewarding. Here’s what you need to know to make it worth your while!
To start, it’s important to understand the costs associated with an investment property, especially if you choose to rent it.
Because the property is not your primary residence, you typically need a 15 to 25 percent down payment for your mortgage. Like other investment property owners, you may opt to buy a fixer upper. As you renovate it, think about what matters most to future tenants: Do you want to add an extra powder room? Do you want to expand the size of the kitchen to allow for more seating? Do you want to add a screened-in porch for more outdoor living?
In addition to preparing the space for guests or tenants and then marketing to fill it, you also will have to handle ongoing maintenance. Plan to set aside one percent of the property’s value for repairs and emergencies.
Although you can manage the property on your own, you may choose to hire a property manager, who typically costs between 8 and 12 percent of the rent price. It’s important to note that they provide numerous services, including handling maintenance requests, new tenant interviews, and late rent payments.
Lastly, you need to protect your investment with insurance. In addition to homeowners insurance, you may also opt for landlord insurance, which covers potential property damage, missing rental income, and liability protection (in case a guest suffers an injury due to poor property maintenance).
Just like with a primary residence, location matters for an investment property too.
Even if you’re purchasing a property as a second home with no plans to rent, your property value will ultimately depend on the neighborhood and surrounding city. Look for an area with a growing population or a gentrification plan underway. Check for a good school district, nearby amenities (like restaurants, shopping centers, and walking trails, which are particularly important for pet owners), and low property taxes. Other signs of a thriving community include easy access to public transportation, low crime rate, and improving job market.
In terms of the actual house, look for as many bedrooms as you can. This approach will help to accommodate potential families as well as friends who want to live or vacation together. Another important feature for both short-term and long-term renters is a fenced-in backyard. This factor is often non-negotiable for pet owners and can be the deciding factor between your property and another option!
To get a sense of both monthly rental rates and investment property values, check out real estate websites. Airbnb also provides homeowners with rental rate ranges in your specific area.
Let The Urban Dog Group help you with your real estate needs. Contact Christine Elias at caerealestate@gmail.com.