Somewhere Under A Roof
Read five basic risk factors involving residential rental investment property.
Learn that residential rental investment property is a long-term investment.
You gotta live somewhere. For most working people, the choice of where to live is determined by where the job is, followed by a decision to rent or own. While home ownership remains core to the American Dream, there are opportunities for long-term residential rental investment property owners in Greater Cleveland. Notably, there are 11 cities in the area in which rentals make up at least 50% of the occupied housing units. (See “What cities lead Ohio with the largest concentration of renters?” article updated Apr. 01, 2024 on cleveland.com.)
Residential rental properties are investments. Like any investment, they involve risk. A prudent investor studies the risk involved, assesses his/her ability to manage the risk profitably, and decides whether or not it is worth taking on the risk. Consider five basic risk factors a residential rental investment property owner should consider*:
- People come and go. Be aware of how much tenant turnover you are able to tolerate financially and emotionally. If affordable, consider property enhancements that may attract and incentivize no-hassle, pay-on-time renters to stay. From an insurance perspective, discuss what you are considering beforehand with your independent insurance agent to understand what additional insurance costs you may incur or credits that may be available.
- Landlord/tenant laws. Be well versed in what is allowed and what is not allowed. Both the landlord and the tenant have rights and responsibilities.
- Cost to purchase the investment property. Your downpayment, indebtedness, credit risk, and loan terms available are essential to evaluate and understand.
- Cost to manage the investment property. Are you handy and available 24/7 to address emergencies? How many residential investment properties and what type (i.e. single family, multi-family, or apartment building) do you own? Is it feasible and/or warranted to hire a property manager or property management company?
- Long-term investment. Owning residential rental property is a long-term commitment. It involves substantial capital investment and time. Successful residential rental investment property owners may experience the benefits of stable cash flow, investment return in the form of real estate appreciation, and tax benefits (deducting allowable business expenses and depreciation).
*The above items are suggested by Richey-Barrett Insurance, an independent insurance agency, for illustrative purposes only. They are not all-inclusive and do not provide professional legal or financial advice. Consult with a professional attorney, accountant, and banker for appropriate advice and guidance in legal, financial, and tax matters.
Risk assessment is ongoing, as new risks present and changes are realized in the market. The market buzz today is all about rising interest rates. That alone will deter some people from buying a home, but they still gotta live somewhere. Some people don’t want the responsibility of home ownership, but they still gotta live somewhere. Maybe that somewhere is a well-managed, residential rental investment property.
Richey-Barrett Insurance is your Trusted Choice Independent Insurance Agent for investment property insurance. Call us to discuss your insurance needs.
