Being a Landlord in Pennsylvania: What to know
Investing in real estate is an excellent way to create wealth safely – if you know what you are doing. If not, taking this leap of faith can turn into a financial nightmare.
What You Need To Know
The first step is to find a good investment property in a nice neighborhood. Why you ask? The answer is easy – to attract good tenants! I would suggest using a real estate agent who has experience in helping people find real estate investments. Your realtor will be able to help you figure out what repairs/upgrades you may need to make and what you can expect to charge in rent.
I would also highly recommend speaking with a lawyer about forming an limited liability company (“LLC). An LLC is a quick and inexpensive way to protect your personal assets in the event the investment goes south.
Financing Is Key
You will also need to get figure out financing as well – banks will treat this type of an acquisition differently, for example, than a purchase of a first home. This often times means requiring at least 20% down on the purchase price and additional insurance coverages.
You will also need to keep in mind you will have to pay closing costs and other out of pocket expenses such as repairs and upgrades. When you add all these potential costs up, you will have a better idea what you need to charge for rent. Your first year is likely to be in the red – but that is nothing unusual.
Remember, this is a long term investment.
Finding A Good Tenant
After you find your target property finding a tenant is the next step. Out of all the steps, this may be most important. You may need to advertise the property in your local paper yourself or use the services of a real estate or management company. In exchange for their services, they usually charge a percentage of the rent; but they will prepare a lease agreement and rental application for you.
Choosing honest, clean and financially strong tenants is critical to you investment; once you have them, do everything you can to keep them. They are rare! Trust us when we tell you there is nothing worse than having bad tenants who don’t pay their rent, their utilities, and/or who keep the property in disrepair. A non-paying tenant can be catastrophic and especially so if you don’t know the eviction process.
We have over 15 years experience in representing landlords and owners of real estate investment properties here in Pennsylvania. We prepare lease agreements to protect your interests up front and help guide you through the process of eviction, if that becomes necessary.
Don’t be unprepared. Call our office today.