As a landlord I've witnessed first-hand the pros and cons of owning investment properties. But with home prices and interest rates where they're at now, adding a rental property to your portfolio may be an excellent idea. New studies of rising rents are being released every day, and The Daily Camera has even reported on Boulder's lack of available rentals with a 10-year low in vacancies for the Boulder/Denver area. According to Hotpads.com, a real estate research firm, rents nationwide jumped 11.6% in 2010 to $1,320 a month. Rents typically rise in the spring so we can expect more increases in the coming months.
Since interest rates dipped below 4% and home prices are still low, your monthly mortgage rate could easily fall below what you receive in rent even factoring in taxes and maintenance, with room for profit. Zillow has a "rental zestimate" feature which allows you to type in a property address and see what the mortgage would be at today's rates and the rental income (though keep in mind the mortgage payment listed depends on down payment, taxes, etc.). Out of curiosity I typed in my home address only to find the rent to be 143% of the mortgage! Craigslist and The Daily Camera classifieds are also a good indicator of going rents. The fact that investors are buying properties now to rent out (as opposed to "accidental landlords" who are renting out their property instead of selling for a loss) shows that the local rental market is very healthy.
There are obviously factors to consider when deciding to become a landlord or adding to your existing rental portfolio…how long you plan to hold on to the property, if you can have equity tied up for that time, who will manage it, etc. It is not a decision to be taken lightly. I work with all sorts of investors so call me at (303) 442-5001 and I'd be happy to go over options for investment properties and help you crunch the numbers.
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