When you’re looking for your investment home, compare the property you’re buying with what has been on the market for the last six months and has sold. Look at what’s pending, too. Sold properties would be good comparables, and they need to be similar to your property. You cannot compare a remodeled and updated home to an older, dated home. Look at the properties within 200 square feet of the house you’re considering. When you have those comparables, you’ll know what to pay for the house. Don’t over pay. You can fall in love with a property, but if you overpay, it may take a long time to earn any ROI.
Calculate Your Rent and Expenses
Look at your monthly costs, which include your taxes and insurance and HOA dues. If you’re including pool and lawn service, add those as well. Figure in all of your monthly costs that are associated with the property, and you’ll know what is coming out from your cash flow every month. Then, you can look at your rent range, which you can estimate from homes on the market currently. Compare properties with the same square footage that are in the same condition and neighborhood. Compare the rent those homes are getting to what has leased in the last six months. You’ll know your rent range. You can start at the high end, and in two weeks if you don’t have an application or any activity, you’ll know your price is a little high or there’s something about the property that turns off renters. Ask the prospective tenants who come to see it what they like and don’t like.
Rental Management and Tax Deductions
Some tax deductions can be taken in the year that you pay for them. For example, straight deductions like rental management fees and repairs can be deducted right away. If you have to fix the air conditioning or a faucet or the fridge, you can deduct the expenses on that year’s tax return. However, improvements like new floors or a new roof or a new appliance must be deducted over time. Consider all these things before you purchase your property.
Unless you’re up on all the tax laws, the best thing you can do is work with a great accountant who understands investment properties. Professionals can tell you about the deductions you could take. You don’t want to miss anything significant. And, keep good receipts because the IRS is watching. Show what you did in the property and have the backup for it.
If you have any questions about this, or you’re considering purchasing an investment property and you want to talk about the potential rental range, please call me. You can always contact us at Debbie Gloss Properties for any help with Orlando property management.
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- Debbie Gloss