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Does Rental Property Ownership Make Sense?

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Terry Story

With Terry Story, 25-year Veteran Real Estate Agent with Coldwell Banker in Boca Raton, FL

It always sounds great when someone says they bought a home, rented it out and the rent pays the mortgage. But it’s not all that simple and not necessarily all that attractive. A study across 285 counties showed that the average annual gross rental yield was 8.94% – which sounds rather nice. But that’s just the gross number and does not factor in insurance, maintenance and other expenses.

Then there are all those horror stories about tenants ruining the property, defaulting on rent payments, being a neighborhood nuisance, etc. So buying a home as an investment property for rental purposes isn’t for everyone. Make sure you have the appetite for everything that goes with property management before you get into this game. That said, if done right and for the long term, real estate investors do well on property price appreciation while barely breaking even on rent. So consider your investing horizon.

Also, home owners believe now is a great time to sell a home… which probably reflects high property prices but should help cool the market a bit by bringing in more supply. In parallel, renters are feeling the squeeze from high rental rates and are beginning to see the value of home ownership. It helps, of course, that the borrowing environment today is way more accommodative of people with less-than-perfect credit history – so this is perhaps good news for buyers and sellers.

Finally, Terry gives out great tips on checking out a property before you buy it, particularly if it’s been renovated simply to make it more attractive for a sale and property price appreciation.