Borrowers are seeing that finan - cial products are also shifting with these trends. There are more 30-year mort- gages for investors than previously. Rental units, particularly single-fam- ily homes, are more in demand than ever, with the numbers of renters across price points rising between 2020 and 2021. A shortage of rental housing across the country is an opportunity for an investor looking to “cre- ate” more inventory by renovating property. The National Association of Realtors predicts that rent prices will rise faster than home prices in 2022. With home supply limited and demand rising for the fore- seeable future, even those holding short-term leases are expected to become long-term tenants. If you’re looking to transition from short-term real estate investments to a longer-term strategy, the rental market beckons. Here are some key dos and don’ts to help you get started.
including tenant screening, tenant communications, and repairs.
returns will be slower, so plan accordingly and understand that this investment requires more patience. Even if you are only breaking even for a few years, your property is appreciating in value and should eventually produce passive income as well as profit when you sell it. NO. 3 Do it onyour own time. Just as the profits will not rush in with a rental, so too will you have the time and flexibility to sell the prop - erty when the time is right. The dead- line is ultimately of your own making. Red flags could include sever - al price drops, extended time on the market, and businesses in the neighborhood closing. These signal declining desirability or difficulty obtaining needed information from the seller. NO. 5 Don’t choose partners such as contractors or building managerswith haste. Inquire among your local network to find highly rated professionals. making borrowing decisions. Even if you are able to purchase the property in cash, financing it might be a more attractive proposi- tion, particularly if the lender allows you to finance both the mortgage and the repair funds. NO. 4 Do look for red flags in a potential property. NO. 6 Do use discretionwhen
NO. 8 Don’t forget to renew your tenant leases.
Renewing leases is an ongoing process that must happen on an annual basis. Allowing month-to- month leases can cost you money. NO. 9 Do get your financial affairs in order. A lender will want to see your credit score, down payment, debt-to- income ratio, and savings. Purchase landlord insurance to cover loss rev- enue, liability, and damage. Build an emergency savings account with at least 20% of rental income. Be sure to keep detailed books that account for every tenant and their security deposits, any expenses and repairs, and any other costs you will want to deduct at tax time. If you are considering a transition from short-term real estate invest- ments to a longer-term strategy, you can be successful, but you must be prudent. Do your due diligence as you would for any investment. •
NO. 1 Do your homework. Before choosing property,
research desirable neighborhoods as well as emerging neighborhoods. Be sure to factor in renters’ criteria such as convenience, safety, good schools, walkability, and access to public transport. Understand the local rental laws such as rent control regulations, eviction rules, and lease specifications. Additionally, take the time to learn local tax laws and ben- efits, including which deductions you can take advantage of. NO. 2 Do limit your financial risk. Much as you would for a shorter- term investment, it’s important to be realistic about the time and money involved. Unlike a fix-and-flip, the
Susan Naftulin founded RFG with partner Jeffery Goldberg in 2009. In addition to serving as president of RFG, Naftulin also serves on the American
Association of Private Lenders Ethics Advisory Committee, where she continuously upholds the real estate industry’s values and supports professional conduct in private lending. Before becoming president of RFG, Naftulin held several senior management positions in the mortgage industry, including general counsel, managing attorney, chief operating officer, and senior vice president for both privately and publicly held mortgage lenders. Prior to entering the mortgage industry, Susan was a creditors’ rights attorney with the Philadelphia law firm of Fox Rothschild LLP.
NO. 7 Do develop a management plan.
The plan may include a manager to oversee day-to-day operations,
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