Investment home purchases rose to 1.14 million in 2016, with most individual investors buying property to generate income as a result of rising demands for single-family home rentals, the 2017 National Association of Realtors survey reports. Indeed, becoming a landlord can be a financially (and personally) rewarding endeavor. If you’re looking for land on which to build a rental property, there’s plenty to consider before making a purchase. You’ll need to look at zoning classifications and restrictions, installing utilities for the property, and the many legal responsibilities of being a landlord.
Zoning classifications and restrictions
Check the land’s zoning classification to be sure it’s suitable for residential use. You’ll also need to consider the size of the development you want to build. Your property must be a certain distance from the street and all neighboring property lines. So, this may limit the building’s size and render it not worth the investment. Additionally, check the height allowance. Some towns don’t allow buildings higher than two stories, which may be an issue if you want to build a three or four-story apartment. There may also be a set number of parking spaces required for the property.
How simple is it to install utilities on the land? Your property needs electricity, gas, telephone, internet, sewer, and running water. If it’s a remote location without a sewer line, the soil will need to undergo a percolation test. If it’s declared suitable, you’ll then be able to install a septic system — along with a well for drinking water (which altogether can cost over $10, 000). If it turns out you’re not able to install essential utilities at your chosen location, you’ll need to consider somewhere else.
The legal side
Being a landlord comes with its fair share of legal requirements. For example, you must follow housing safety codes for wiring smoke detectors and managing lead-based paint hazards. There’s also health codes concerning working plumbing, mold issues, and pest control. Fair Housing Laws are in place to prevent landlords discriminating against tenants. Landlords need to be ready to make reasonable modifications to improve accessibility for tenants with limited mobility. Examples of reasonable modifications include installing a wheelchair ramp, widening doorways, and installing grab bars in the bathroom.
Becoming a landlord is a challenging but rewarding journey. You get the freedom to be your own boss and the opportunity to build personal relationships with your tenants. With careful planning and tenacity, developing and renting out a property can supplement your income or replace it entirely.
By Karoline Gore