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Are you cut out to be a landlord? -- Page 2

Can your house command that final amount in monthly rent? First consult the Fair Market Rental Rate statistics at the Department of Housing and Urban Development Web site. It breaks down average rentals by number of bedrooms for metropolitan statistical areas across the country. Your property may get more or less than the average shown.

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Next, study the for-rent section of your daily newspaper's classified ad section, taking particular note of comparable properties ("comps") in your part of town. Track properties and prices for several weeks and call on a few "comps" to learn more about the amenities they're offering. After all, they're your competition.

Then make certain that there are no local limits to the amount you can charge. Rent-control statutes, while rare, do exist.

Finally, find out from your local chamber of commerce or board of Realtors what homes in your neighborhood have been appreciating at annually. If they've been going up, say, 5 percent a year consistently, it may still be a good investment even if you only break even on the rent.

Time to rent?
Once you determine that you can rent the property and realize enough income to meet your goals, it's a good idea to ponder whether you should rent the property.

"In a lot of cases, people become landlords by default. They can't sell their homes and they have to move, so somebody tells them they have to rent the house," says Lucier. "In many cases, that's not a smart thing to do."

Lucier says that, at a minimum, you're going to need to become conversant in four legal documents:

Even if you're going to do it through a service, you've got to know what you're doing," says Lucier. "When you deny people the right to rent, you must follow all the rules or you're going to get sued."

To time your move into income property, as well as protect your investment, author Robert M. Campbell, in his book Timing the Real Estate Market, suggests keeping a close eye on these five "vital signs" in your community:

  • Existing home sales: the best indicator of real estate price trends.
  • New home building permits: a good indication of projected growth.
  • Mortgage loan defaults: these usually indicate that the local population is being pinched financially, often by job loss.
  • Foreclosure sales: a good indicator of how the local economy is doing.
  • Interest rates: these greatly influence home buying, and by extension, home renting.

A lot of people aren't cut out to be landlords," says Lucier. "You've got to know what you're doing if you want to do it right and be successful and make any money at it. It's not over-daunting. It's not that complicated at all. But you've got to take your time and do your homework. Within 30 days, you can be up to speed, and if you're in the right market, you can make out like a bandit."

Jay MacDonald is a contributing editor based in Florida.

 
 
-- Posted: March 11, 2003
   

 

 
 

 

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