Buying an Investment Property: Long Term Rentals and More for WNC
Asheville is an area known for tourism, which means there is a lot of opportunity for investments in real estate. Whether you’re considering a short term or vacation rental property or a long-term rental for local residents, there is a lot to consider before taking the leap. Before you get started, here are just a few things you should know about the process.
Turning Your Current Home into a Rental
There are a number of reasons you may want to transition your current home to be a rental property. While the real estate market is good in Asheville, sometimes people choose to rent if they’re unable to sell their home right away. Or maybe you are moving temporarily for a job or school but don’t want to sell your house. Whatever the reason, it is possible to successfully rent your home on a long-term basis in Asheville. Generally, a long-term rental lease agreement will be for a year and renewed annually.
There is a lot more information available about this process than we can distill even in this blog post. Several resources, including this online article, offer multiple steps that can help you transition from full time living to a landlord in your own home.
- Finding the right insurance for a rental property.
- Making repairs or upgrades that renters want.
- Determining the rent price point.
- Finding and vetting a tenant.
Several of these are complex processes that will require a lot more research on your part. For example, when you choose a tenant you need to make sure you’re compliant with local and federal regulations, such as the fair housing act. We recommend that you speak with a property management company or even a lawyer or other professional if you are interested in long term rental properties.
Buying a New Home to Rent
If you want to buy a home in the Western North Carolina area with the specific intention of renting it out, there are also some things you want to consider. There can be a few factors that influence what you charge monthly, including the size of the home and the area where it’s located. It may also depend on some of these additional costs as the homeowner.
You may also find yourself having to deal with the aftermath of bad renters. This may include damage or even eviction processes. These are not experiences for the weak hearted, so be prepared to deal with them before you buy a rental property.
Keep in mind that a good tenant is an amazing thing. It’s not uncommon for landlords to maintain rates for good tenants so they can feel comfortable with the people living in their property. It’s a good idea to incentivize excellent tenants.
Short vs. Long Term Rental
In Asheville and the surrounding areas, we’re still having a lot of conversations around long versus short-term rentals. While there is a battle between affordable housing advocates and those who want homeowners to be able to rent their homes for tourists, short-term rentals are still growing in the area.
Within the city limits, the laws are pretty clear. Asheville allows homeshares, but not full-time short-term rentals. Both types of arrangements can be done using a service like Airbnb. When it comes to ADUs, the idea is to promote long-term rentals and encourage landlords to rent to locals.
Outside the city, some of the rules are less specific. Some people do choose to buy new properties with the intention to use them as short-term rentals. Again, we encourage you to check with the city or county and learn what is and is not permitted.
Growing Your Wealth as an Investor
It’s important to know that rental properties are not a get rich quick scheme, but they can be a path to growing your wealth. Some of it will depend on your current financial situation before you make a big purchase for a second home in the Asheville area.
This post provides a lot more information on the process and whether or not it is a good fit for your financial future.
Ultimately, you need to understand the return on investment. The ROI takes into account the revenue and the expenses to make sure you’re maintaining equilibrium or profit.
Mortgage Considerations for Rental Properties
Most of the time, homebuyers interested in purchasing rental properties will need to provide at least a 20% down payment. In the past, lenders required a two-year history of managing rentals in order to use the income to qualify, however, that policy changed a few years back which is a great opportunity for first-time investors to use unseasoned rental income (75%) to help qualify.
We are happy to help you with more details about finding the right loan for your investment property. Whether you want to buy a long- or short-term rental property, we can help through the process or provide you with the resources you need to make this happen.
Before you start looking for your investment properties, contact GoPrime Mortgage, Inc. to find out your options. We are happy to help.