When you choose a rental property to add to your portfolio, your primary goal is for that property to be profitable. While you know that there are expenses that go along with your rental property, you want it to ultimately generate income, whether you're hoping to generate income in your retirement years or just to build your overall income. Consider some of these key do's and don'ts as you look for the right rental property for you.
Do: Work to understand the market.
Right now, the cost of homes in Nashville is on the rise. The average cost of rent is around $1,500 per month, while the average home value is currently more than $250,000. It's important, however, to understand how changing home prices impacts the rental market. Right now, it's cheaper to rent a house in Nashville than to buy one. That means that as a landlord, you may not be able to generate enough income from your rental property to pay for the mortgage in addition to other expenses like a property manager, maintenance and repairs, or insurance.
Do: Create a solid budget.
With the current rental market in Nashville, it's even more important than ever that you have a solid budget in place before you purchase a property. Our guide to getting started with rental properties will help address many of the issues you may have as you create that budget or decide whether a rental property in Nashville is right for you. Make sure that you include how much you can afford to spend on the property up front as well as how long you can afford to pay the mortgage if you can't find a renter for a while. Keep in mind, too, that selling a Nashville property may be more difficult until the market changes.
Don't: Assume that a difficult market means that you can't find the right rental.
While a difficult market can make it harder to find a rental that will generate the profits you're hoping for, it doesn't make it impossible! In many cases, you can find the ideal Nashville rental property--you just may need to look a little bit harder for it. Working with a great real estate agent will help you find a property within your budget, in the right neighborhood, so that you can generate profit from your rental. As you work with an accountant, especially if you have long-term plans for generating income from the property, you may also be able to develop a better idea of how your current investments will impact your eventual financial future.
Don't: Choose a house that will require a ton of work.
In many cases, home improvement projects cost a lot more than you expect up front. Even if you conduct a full inspection and work with a contractor to get a solid estimate of those repair costs, you may quickly find that you have to pour more money than expected into the rental property--and in the current Nashville market, that can mean that you spend more on the home than you're able to generate in rent. Instead, choose a house that is already in pretty good shape, and make sure you have an inspection to look for any potential problems with the home.
One of the most effective ways to build your rental property portfolio is to diversify. Then, even if the market changes, your overall portfolio will still support the financial growth you're hoping for. Invest in properties in different areas. With a great property management company, especially one that spans a wide geographic area, you don't have to choose a rental property that's close to your own home or office. Consider investing in different types of properties. As your investments increase, you'll find that diversity helps support your entire portfolio.
Do you need to do more research before choosing a Nashville rental property? Visit our Research Center to find and research statistics on market performance, population growth, employment trends, migration patterns, and more. If you're in need of a rental management company to help take care of your rental property, contact us today.