As rental prices increase across the country, more people are considering the purchase of rental property as a way to diversify their investment portfolio or supplement their income, or both. Here in the Anaheim-Placentia-Yorba Linda market, there are plenty of real estate options that could make great rental properties. Read our post to get an idea of investing in rental property in this part of California, and tips for finding the right financing.
Buying Rental Property – Questions to Ask Yourself First
Before jumping in head first, potential rental proprty owners must ask themselves if they’re really prepared to be a landlord. It take a lot of committment to be a good landlord and to find good tenants. Plus, potential rental property owners need to determine if they are financially prepared for the upfront and ongoing costs as well. It may take a month or two before you find a good tenant. And if you’re buying a fixer upper, you’ll need to account for the added time and expense of making the necessary repairs. Do you have enough money in savings to make the mortgage payments until you can get a tenant in place? A few other questions to ask yourself before deciding on becoming a landlord include…
- Will I be using the services of a property management company, or can I manage it myself?
- Will this be a longterm rental property or short term rental property?
- Exactly how much money do I need to charge in rent in order to cover my expenses, including things like property taxes, homeowners insurance, repairs as needed, property management costs (if applicable), etc.
Buying Rental Property in Anaheim-Placentia-Yorba Linda
Another important aspect of becoming a rental property owner is to familiarize yourself with the rental market in your area. Here in the Anaheim-Placentia-Yorba Lina market, we’re seeing median rental rates around $3,000 -$4,000 per month; however that figure is likely driven up by the large number of upper-tier real estate in the area. There are also homes in lower price points that rent for closer to $1,500 – $2,000.
As a prospective landlord, you’ll need to research median rental prices for homes similar to yours in the surrounding area and compare that with what your monthly mortgage payment would be. If the rental market isn’t strong enough for you to be able to cover your expenses, it may be best to reassess your home buying budget. Also keep in mind that Fannie Mae and Freddie Mac recently updated their maximum loan limits for 2017, which means that next year, you may be able to get a conforming mortgage for homes that are in higher price ranges. Before the change, any single-family home priced above $625,500 in Orange County had to have jumbo financing, which typically requires a larger down payment and often carries a higher interest rate. Starting in 2017 however, Orange County home buyers can finance up to $636,150 with conforming loans.
Timing Your Purchase
Speaking of interest rates, if you’re serious about investing in a rental home it may be wise to act quickly. Recent annoucements from the Federal Reserve have indicated that mortgage rates could increase in 2017, so if you’d like to lock in a lower rate today, please contact Trilogy Mortgage to discuss your rental property loan options.