Wondering what the dos and don’ts of buying rental properties in Maine could be? Read on to find out!
If you’re looking to buy a rental property and become a landlord in Maine, you will need to look at the big picture and consider all the pros and cons and dos and don’ts to make the right decision. In today’s world, buying a rental property can help you amass the money you need for future investments and securing your future. However, it also comes with its fair share of ups and downs and challenges and rewards. So, before you plunge into the life of a landlord, take a look at the following dos and don’ts of buying a property in Maine!
The Dos of Buying Rental Properties in Maine
Here are the dos of buying rental properties in Maine:
Make the Best of Your Tax Deductions
Realty taxes, property insurance, and mortgage interest are deductible against rental income. If you incur losses, these can be deducted against other forms of income. Plus, depreciation of the building is also deductible. Moreover, if you buy a rental property, you can resell it and invest the amount in another rental property without worrying about paying any capital gains.
Look into Diverse Property Types
When purchasing a rental property, it’s best to determine the type of property that will help you gain the maximum return on investment. For instance, a unit in a multi-family condominium might be a smart buy. Moreover, an apartment in a university town might be ideal, especially if you have children looking for student housing. You might also use the home as a vacation home and rent it half the time.
Take Your Landlord Duties Responsibly
When buying rental property in Maine, you need to think of all the responsibilities that will come with being a landlord. You will have to deal with the tenants, manage the property, and account for repairs and problems. Your responsibilities will include all financial issues and resolving any personal problems your tenants might have.
Calculate the ROI of the Property You Want to Buy
Use online technology to calculate the expected ROI you stand to receive on the property you’re interested in purchasing. You can input your mortgage interest rate, down payment amount, and all of your expected costs into the worksheet to generate the results. Online mortgage calculators will enable you to accurately assess the big picture and consider long-term investment benefits.
Learn Tenant Laws
When purchasing a rental property, you need to consider the laws that protect your tenants so that you don’t find yourself in any legal trouble down the line. After all, becoming a landlord is a demanding job that comes with the added responsibility of keeping your tenants safe and happy by staying well-informed and prepared for all eventualities.
Don’ts of Buying Rental Properties in Maine
Here are some important don’ts of purchasing a rental property in Maine:
Underestimating the Time Involved
Being a landlord is a time-consuming job that will require your attention and ability to deal with emergencies. Firstly, you should not underestimate how long it will take you to find the ideal tenant. Screening potential tenants matters as you will essentially be leaving your property under their care. You will also need to set out time for all the paperwork and maintenance work.
Overlooking Financial Overlays
Don’t make the mistake of overlooking financial outlays that fall beyond your original rental property purchase plan. Although these expenses might be deductible, you will still need to pay them. You will have to deal with some repairs now and again. You will also have to account for emergencies, such as water leaks, plumbing issues, smoke or fire damage, mold, and broken hardware.
Buying a Property in an Unsafe Neighborhood
When it comes to real estate, you get what you pay for. It’s why you need to make sure that you thoroughly research the neighborhood you want to purchase a property in. Make sure that it’s a safe area with access to amenities. Ideally, you should look for a neighborhood with a growing population, an immaculate development plan, parks, schools, and a sense of community. It will help you attract more rentals to the property while offering you great potential investment growth.
Losing Sight of Essential Things
An essential don’t of buying rental property in Maine is “Don’t lose sight of essential things that need to be done!” This means things such as performing a thorough building inspection before the purchase, ensuring building insurance, tenant insurance checks, fire safety checks, and more. Take care of all the often missed details and minor aspects of purchasing a rental property for your peace of mind.
How To Buy House In Maine As a Landlord
Before diving into the property market, you should familiarize yourself with the financial process of becoming a landlord. In Maine, the mortgage application for a rental property is similar to a primary residence but carries some unique requirements.
Lenders generally require a minimum credit score of 620, although a score of 740 or higher is recommended to secure the best interest rates. The down payment is also higher for rental properties, typically ranging from 15% to 20%, or even 25% for multi-unit properties.
Your debt-to-income ratio should ideally be between 36% and 45%. If you’re a first-time landlord, lenders may not consider potential rental income in their calculations. In addition, a solid employment history and sufficient savings to cover potential financial hiccups are crucial.
Remember, while conventional mortgages are available for rental properties, government-sponsored programs like FHA and VA loans are not, unless you plan to live in one of the units.
Becoming a landlord in Maine is a significant decision that requires careful financial planning. Ensure you meet the necessary qualifications to secure a mortgage for your rental property and prepare for this additional responsibility.
Buying a rental property is arguably more complex than buying a home for yourself and your family. You need to consider the type of location, building, and tenants. You also need to determine the investment capacity. But when the essentials are covered, a real estate rental investment will present you with an excellent return on investment, leading to more investment opportunities. Just make sure to remember the dos and don’ts of buying rental properties in Maine to make an informed decision.
Ready To Buy a House In Maine?
If you’re ready to make the leap and buy a rental property in Maine, please reach out to our team of loan experts. Integrity Mortgage (NMLS #1692497) is a preferred partner for Maine Maine landlords seeking to buy investment properties. We’d love to be your partner in building your future financial stability with investments in real estate today!