While property is almost always a solid investment, there's a lot of risk involved if you're buying a place with the intent of renting it out—even if you've got the means, it can be scary to take the leap. One Billfold writer is currently mulling over this thorny question—she and her husband own a New York apartment, and with good savings and equity, they're contemplating investing in a place, but don't really know where to begin.
Here's how she explains it:
"I don’t really know anyone who does this, who puts money in real estate rather than mutual funds, who buys property beyond the property they need to live in. Anyone besides Donald Trump, I guess I should say, and he’s not exactly my kind of role model. What does it even mean? My tentative thought is that we would buy another apartment, or if we got co-investors, maybe a small house, in an up-and-coming area of Brooklyn. The kind of place we would like to live in ourselves. We could rent it out temporarily (attempting to be good, ethical, responsive landlords!) and then later, if we needed to, sell our current place and move into the new one."
Plenty of commenters jumped in, both with horror stories—a tenant pouring cement down the toilet!—and words of encouragement, including one very useful tip gleaned from one person's mother, a small-time real estate mogul in Connecticut. "She has always set the rent at about 10 percent less than the prevailing market rate for a comparable property," he writes. "She feels this tends to keep tenants in the rental property longer [...and] that it brings in a wider variety of potential tenants, so she can be more selective about who she rents to."
If the prospect of taking care of more than one property at once is daunting, keep in mind that a lot of tenants will be willing to barter cheaper rent in exchange for performing minor maintenance tasks around the building, or in some cases, taking on full-scale renovation projects. With any property, you'll want to look into the city's landlord-tenant laws first to know what your responsibilities will be, and keep in mind that most co-op buildings require approval before letting you move a renter into your apartment.
We've got more tips on navigating life as a first-time landlord here, and if you need further incentive? Another Billfold commenter makes a compelling point: "If nothing else, you should do it because the world could use some more landlords that aren’t crappy."
The 7 biggest mistakes of first-time landlords (sponsored)