It’s not complex, it’s a duplex
Hey Nickels, if you are a single woman do yourself a favor and purchase an income producing property. I lived with my parent until I was 27 because I wanted my first place on my own to be mine. As a single woman without children, I did not need a huge space nor did I want to commit to a forever home. This required me to be forward thinking with the type of property I wanted to acquire. I purchased a duplex because it secured my uncertain future by creating an initial situation where I could live in an owner occupied property and get a 50% tax benefit. Also, as a single person, I had the added security of not living alone and therefore, discouraging crime. I figured when the time came and the duplex no longer suited my growing family’s needs, I could move and still maintain a source of passive income plus receive 100% of the tax benefit.
I never got married but I did have the opportunity to move with my job. My former employer had acquired offices around the country and as such, opened the opportunity for me to work remote out of those various locations. It was an amazing explorative experience and it opened up many other opportunities. However, living in different geographic locations meant having different cost of living requirements. Luckily, I was able to rent both units of my property to help finance my standard lifestyle. While my prior employer was generous with their flexibility to allow me to work remote, I did not receive a cost of living adjustment. Therefore, the additional passive income from my rental property helped subsidize my living expenses beyond my W-2 wages.
Investment properties are great income resources for single people but a huge responsibility! Below are some nic tips to consider if renting a property.
Nic#1: Be sure to familiarize yourself with the rental compliance requirements in your state and municipality. You may want to do this step before considering purchasing an investment property as it may dictate where you decide to buy or if you decide to buy. There are certain cities where tenant rights are disproportionately favored and the rental compliance can be more restrictive. Also, anytime you are dealing with human rights which housing laws are the legalities can become convoluted. In some metropolitan areas you must obtain and maintain a rental license, provide fair housing information, pay trash collection fees, comply with maintenance schedules and standards, partner with utility companies to mitigate the risk of a lien due to tenant delinquencies, and much more. This can be a lot to manage.
Nic#2: If the responsibilities of tenant management sounds overwhelming, this is not a deal breaker for your investment opportunity. You may want to consider hiring a property manager. This is one of the consultation services, 828 A.M. LLC can offer. Please subscribe to contact me and learn more. A property manager can help you screen tenants, coordinate repair projects, record keep expenses, assist with eviction proceedings, and maintain the aesthetics of the property. It is important these professionals are screened. I have had a few horror stories with property managers but I will spare you the details in this post.
Nic#3: ALWAYS screen your tenants. An income producing property can quickly become a money pit with the wrong occupant. Screening should include a state criminal background check, income verification, personal referral(s), credit check, and a judgment check. My suggestion is if you find a judgement on a prospects record during the screening process, immediately reject the applicant. Speaking from experience no landlord wants to evict a tenant. It is a very costly and time consuming process that you only do if you were left with no other option but to mediate inside the courtroom. So if a former landlord went through the trouble to file for the legal proceeding, the situation had become severe. Spare yourself the headache and move forward with another applicant. All other subject matters that may come up during the screening process are negotiable in my opinion.
Nic#4: ALWAYS check the public zoning records to ensure the income property is properly zoned for its use. So many Jack of all trades convert their homes without the proper permits. Do not buy a income producing property without checking the zoning. You can sometimes rezone if the property was converted without prior authorization but be sure to consider that expense during settlement negotiations. I have personal experience with zoning and as such, 828 A.M. LLC is happy to assist you with the necessary paperwork to rezone your property for proper use. Do not illegally operate your property as a business. It will come back to haunt you if you ever need to evict or file any other legal proceeding.
Nic#5: Ensure your homeowners insurance is updated accordingly. The benefit of an owner occupied property is that most insurance companies will give you the homeowner rates which are much lower than the investment property rates. However, if you ever relocate be sure you convert your homeowners insurance to ensure you have proper liability coverage. Also, ALWAYS require your tenants carry their own renter’s insurance as the owner’s insurance does not cover the personal property of a tenant. Renter’s insurance should be an added line on your leasing agreement.
Nic #6: Create a comprehensive leasing agreement. I like to pair my leasing documents with a bed bug addendum, house rules, and a walk through checklists. If you are a Pennsylvanian, please subscribe to contact us at 828 A.M. LLC to receive copies of our PA compliant templates which can be customized to your specifications.
Nic#7: If your property is being financed by a financial institution or investor be sure to check the clauses of your document to understand the restrictions of use. Non authorized use of a financed property could result in the default of your loan. Also, if you live in a HOA community be sure to check their rules as it relates to rentals as well. Some HOA permit long-term renting but not short-term renting like an Air bnb. Essentially, always do your due diligence to determine how a property can be used so you can make the right decision that fits your needs. Unless you are a flipper, you do not want to be stuck with a property you cannot use.
Nic#8: Be sure to manage your money properly. Create a separate bank account to collect rent and keep tenant deposits. Do not co-mingle a tenant’s deposit with your personal assets. Also, always keep an emergency fund for repairs and maintenance issues that WILL come up without warning. Unlike repairs for a personal use residence you must tend to tenant issues within a reasonable timeframe.
In summary, singles and others just looking for a long term investment opportunity may consider buying an income producing property. Check with your local agents to review the inventory if you are in the market for a new home.