- Consult your financial planner (If you have one): How is the rental property going to fit into your whole investment portfolio? Is it going to be long or short term? These questions may have impact on your investment goals whether you're are looking at medium term capital appreciation or as part of your long term portfolio.
- - Consult your tax account– In most cases, there are some tax benefits when you own an investment property. You could deduct your mortgage interest, taxes, insurance, and expenses associated with owning the rental property. If you are experiencing rental loss, you might even be able to write that off but they are subject to some income limitations. So, talk to your tax account to find out if you're eligible for those tax benefits.
- - Get pre-approved! Unlike during the condo boom years when you can easily get a pre-approval letter within hours after giving out some basis information over the phone, these days, it takes a little bit more work. Lenders are much more stringent about giving a pre-approval letter. Besides running a credit check, most lenders may need you to provide your pay stub, W2, and bank account statements. Depending on your individual circumstance, (employed, self employed,etc.) the documents required may also vary with different lenders.
- - Are you ready to be a landlord? Are you going to manage the rental property or have someone do it for you? If you are newbies, you may feel excited with your first investment and wanted to manage it yourself. There's paperwork, time and energy needed to manage a rental property. So, if this is something you don't feel up for, you might want to hire a management company to deal with it.
- - Run all your numbers. After getting pre-approved and narrowing down the price range that you're comfortable with, run the numbers. This is where an experienced realtor can come in and help you figure out the high level calcs. The costs for buying and selling the rental property, the rental rates, vacancy rates, maintenance/repair costs, cost of hiring a management company and other expenses associated with owning an investment condo should all be considered.
- - Be open minded. I once had a client who thought distressed properties are usually not in good condition and did not even want to consider looking at them. However, majority of the condos that I have come across are usually in pretty good shape or only require minimal work to make it rentable. Since this is an investment property, be open minded about looking at distressed properties (short sales and bank owned). After all, these properties are generally priced 5-20% below market value which will give you a good start and more head room for appreciation down the road.
By Wendy Leung with Seattle Condo Review. A guide to Seattle condos exclusively for buyers and sellers.
Wendy,
There is a very important missing piece of information, some condos have a rental cap.
A condo with a rental cap can be very challenging to rent.
My sincere advice to anyone looking to buy/rent a condo is to read and thoroughly understand the condo declarations and plan accordingly.
Failure to do this can result in owning a condo without the ability to rent.
Seth
Good point Seth! Totally agree.
Next month i am going to buy a condo in Florida. It contains beach view, highest quality siding, insulation and roofing for maximum durability with sound proof walls and floors. But i never thought about these six things which you explain here, but after reading your article i think this is very informative for all before investing in condo.