Considering Becoming a Landlord?

When we looked into purchasing rental property in 2000, we had no idea what we were doing, or how to go about it. We were nervous that being landlords would put us in an early grave due to stress, or at least cost us tons of money. We knew if we could keep up the houses until they were paid off, and keep having the tenants pay all or most of the mortgage payment, it could be huge for our retirement. We own 2 rental properties in the North Seattle area, and so far it’s been an overwhelmingly positive experience.

We figured out pretty soon that based on the mortgage payment, we’d have to have a high number of bedrooms and baths, in order to charge as much rent as possible.  Ours are 4 bedroom, 2 bath houses, but to buy a 4 bedroom house can get expensive – our solution was to find some of the thousands of houses in our area that have 2 bedrooms and a bath upstairs, and add the rest to the unfinished basements.  Many basements have adequate to high ceiling height, and when windows are enlarged for egress, the bedrooms downstairs can be quite appealing to renters. Townhomes are good to consider too; the low maintenance makes them great options.

There are many considerations to choosing tenants, the first of which has to be a strong desire to provide a nice, quality place to live.  You want to feel good about the house you let others live in, and we really feel grateful for the tenants we’ve had, and that they’re helping us (in a major way) buy the house over time. It’s got to be a win-win for everybody, and if you buy a house in a nice area, keep the place up so it’s appealing, and screen tenants properly, you’ll have good renters who’ll respect your property.  Advertising is easy with Craigslist, and screening tenants is a snap too with many online screening companies available.  The vagaries of the landlord-tenant market require flexibility too – when it’s a landlord’s market (as it definitely is now) it’s pretty easy to have your pick of tenants, and when it’s a tenant’s market you might need to adjust the rent.

Down payments on investment properties are currently 20%, and there are many houses available that would make great rentals – I’m thinking under $350k.  The loan amount on a house bought for $350k would be $280k, and as of today (interest rate of 5.375%) the payment would be around $1568.00 – taxes and insurance could add approx. another $375, which totals $1943.00.  If you could get $1900-2000 in rent/month, (what I’m getting currently on both 4 bedroom houses,) you’d be looking pretty good, especially when you factor in the tax benefits. Can you imagine, 30 years from now, rents being quite a bit higher than they are now, with no mortgage payment to pay? It’s sounding pretty attractive, isn’t it? I happen to love houses, and don’t know much about the stock market, so for us to diversify our investments and focus on something we understand and enjoy feels great.

There’s also another option – the Home Path program, where you can put down 10% – there are tons of houses available that qualify, which makes it a lot more approachable for the first-timer.  I’m sure you’ve heard it over and over, but with the interest rates and home prices being what they are, and with rents projected to have double-digit increases over the next couple years, it’s an unbelievably awesome time to buy investment property.  If you’d like more information, feel free to contact the Real Estate Gals – if we can do it, so can you!