We LOVE investing in rental properties. They are a great way to build wealth for the longterm and they can have some great tax benefits, too! Think about it, if you buy an investment property with 20% down on a 30 year mortgage, and put a renter in that will not only cover the mortgage but also pay you a small amount (many people make $200+/mo, more is better, obviously, but it’s not a bad deal at $200/mo) each month. This is $2400/year that you can use to make repairs, maintain the property, pay down your mortgage faster, or save for the next one. It might sound small, but small things, done regularly, add up to BIG results.
There are a few things you should think about before jumping right in.
This is a business, and should be treated like one. By putting together an LLC, you can not only limit your liability should a problem arise in the future, but also simplify your accounting by opening some business checking and credit accounts in the name of the LLC. Use your new business accounts for acquiring the property, taking title (the name on the deed), purchasing materials and hiring contractors to make repairs and upkeep on the property, making mortgage payments and receiving rent.
You can find more info on how to file for one here.
Once you get a business started you can open a separate bank account. You will also want a good insurance guy. My husband and I use Bill with Butler and associates. They can help you insure your business and also get rental properties insured. You will definitely want a different policy than a home owner’s policy. Also, make sure you require your tenants to carry a rental policy.
Here are some of our rental properties:
Then there’s the legal paperwork.
You can find leases online. If you go that route, make sure you are looking for MN specific leases—we’ve used
Nathan Kavlie for contracts in the past. If you’re looking for something more specific to your property or your needs, a real estate attorney can draft a lease for you for a few hundred dollars usually. While it may seem like a high up front cost, you’ll use it for years to come, and then you KNOW you’re covered the way you want to be. We have worked with Will Torhorst in the past and he always does a great job.
Collecting Rent, the easy way!
You can always take a check, or show up at your tenants door every month with your hand out, but these days, automatic payments are the way to go. A great site to check out is cozy.co, so go make an account. It’s FREE! It’s an amazing resource for landlords where you can list your property, accept applications online, run background and credit checks, and collect rent electronically! This is the boring part, but if you have these in place beforehand, it’ll make finding and placing tenants much, much easier once you have your property!
Learn from others who are already doing this!
One of the most common fears we hear about is tenants calling in the middle of the night for toilets overflowing. While this may actually happen, it’s rare. And if you do a great job screening your tenants, you’ll probably never have an issue. There is an amazing resource for real estate investors online called Bigger Pockets. They’ve got podcasts and forums and tons of experienced investors who know how to handle any problems that might arise. Check them out!
Once you have these steps started, let’s talk and we’ll start the process of finding you your new rental property!
Interested in getting started? Send me a message, lets meet up and chat about your goals!