Interest in real estate investing and buying rental properties seems to be at an all-time high, thanks in no small part to some popular TV shows. In addition, there are plenty of people out there who either can’t afford to buy a home or would just rather rent. Millennials make up the largest share of first-time homebuyers right now, but a large percentage of them would rather rent than own. It’s a great time, then, to buy investment properties. But you do need to go into with your eyes open and properly prepared. So here are some tips for people who want to buy to rent in Chicago.
Make Sure You Are Landlord Material
Before you buy to rent in Chicago, you’d better make sure you’re really cut out to be a landlord (or be prepared to pay 6% to 10% of your rental income to a property management service). For being a landlord involves numerous headaches and hassles and requires no small amount of patience and persistence. You will have to chase down rent payments, you’ll have to put up with middle-of-the-night calls about broken air conditioners, and, sometime, you’ll have to go through the legal hassle of evicting tenants. Are you ready for and able to handle all that?
Take the Long View
If you’ve determined that you really are landlord material, you also have to be prepared to take the long view if you buy to rent in Chicago. Real estate investing, especially rental properties, is by no means a get-rich-quick scheme – it takes time. In fact, those with experience say that the most common mistake is not holding properties long enough. In fact, just breaking even with respect to cash flow is good in the beginning because you will be paying on the mortgage principal. Then, later down the road, you’ll be putting cash in your pocket.
Know the Law
If you want to buy to rent in Chicago – and also want to stay out of legal hot water – then you’ll definitely have to know the pertinent tenant-landlord laws. For example, there is a raft of strict regulations concerning security deposits and how they must be held and when returned. In fact, in some states, tenants can bring legal action if you don’t return the deposit within the specified time period. You also need to be familiar with eviction laws and fair housing regulations because it’s easy to run afoul of the law inadvertently.
Have Money for the Unexpected
Buying to rent in Chicago and making a success of it also means budgeting for the unexpected. Failing to plan for the host of unexpected expenses, especially major repairs, that inevitably come up with rental properties is a quick road to financial (and legal) disaster. The standard advice is to set aside about 20% to 30% of rental income to meet the unexpected expenses.
Always Consider Location
Location is just as important for rental properties as for any other kind of real estate. For location hugely impacts the two most important considerations when you buy to rent in Chicago: cash flow and appreciation. For example, if the location is such that rents are low, that must be set off by greater appreciation. And if appreciation is low in a certain location, you must be able to charge higher rents to compensate for the lower appreciation. Location is the determining factor here, so be sure to consult your agent to see what the outlook for the area is. (To discover more about this, just call 773.233.8180.)
Hire a Local Agent
So, should you buy to rent in Chicago? It depends because the potential exists to make a lot of money over time, but you can also lose your shirt if you don’t know what you’re doing. You must, then, learn as much about it as possible before putting your money down. You can also lean on the knowledge and expertise of your agent who fully understands the local markets and can assess the income potential of properties. Let our qualified agents help you toward success. Contact us today at 773.233.8180.