As an investor, landlord, and real estate broker, I recommend you talk to people that own rental properties, talk to your accountant and talk to an real estate attorney. Owning rental properties is not for everybody, but if you have what it takes, this is one of the best ways to build wealth and cash flow. There are so many factors that can apply. The obvious one is how much can you buy it for, what improvements need to be made, what kind of rent can you get and how to find quality tenants? The whole idea of owning rental properties is to buy something that will appreciate while others payoff the debt.
If you have not already, the first step is to find a qualified Mortgage and Real Estate Broker who understands first hand how to identify and finance an investment property, analyze the acquisition, capital cost and capitalization cost. Once you have a property identified, make and negotiate an offer that fits within your predetermined analytics. Buying a investment property should not be emotional and you need to be able to walk away if your numbers do not fit! There are more properties. Next you need to do a thorough inspection to determine the condition of the property. This is the best spent money! Five factors to consider; Foundation, Roof, Heating, Plumbing and Electricity. These are all the big ticket items that can make a great acquisition a poor one. You can still purchase a property that have these issues, but you need to take into consideration the cost and that should reflect your offer and bottom line. You can usually get a good buy on a property that is in need of some differed maintenance... It will help significantly if you know or you can get referred a quality contractor who can provide references, meet time lines and stay under budget. A bad decision on who to use as a contractor can once again make a great acquisition a poor one...
Once you own the property, you will need to find quality tenants. I personally do not recommend a property manager unless you do not speak English, you plan on moving to a different state or you will own more than 4 rentals. You should not buy a property that you can not get to within a hour. A property manager will collect 7-10% to collect the rent and field phone calls and that affects your cap cost and bottom line. You may need a Real Estate broker to help you find tenants and you will have to pay commission.
There are a couple of resources that you can find to determine a good neighborhood. There are websites where you can find out current market rents, crime rates, and the names an proximity of sex offenders. Keep in mind, you are buying an investment property and you are not going to live there. I am not as concerned about neighborhood as I would be concerned about finding a quality property that will attract quality tenants who will pay full market rent that cash flows. If you are not prepared to deal with people and there problems, owning rental property may not be a good fit.
Once again, buying and owning investment property is very rewarding and a great way to build wealth and generate cash flow. Buying and owning any kind of real estate has legal and tax implications. It is imperative to do your homework and find qualified professionals who understand this market. Seattle area is a great rental market.
Jeffrey A. Costello CRS CNE ABR CDPE CIAS
Coldwell Banker Bain
"Never forget: the secret to create riches for oneself is to create them for others."
-Sir John Templeton