If you're thinking of investing in real estate in Des Moines, Iowa, owning a rental property can be a great option to generate passive income. However, it's not as simple as just buying a property and renting it out. To be a successful landlord in Des Moines, you need to be well-informed about the local real estate market, organized, and prepared to handle various challenges that may arise. In this guide, we'll share valuable advice to help you make your rental property business a success.
Conduct Extensive Research
Before purchasing a rental property, you must conduct extensive research to ensure that it's a viable investment. Factors to consider include the location, rental rates in the area, vacancy rates, property taxes, and potential expenses. You should also research the local laws and regulations related to rental properties to avoid any legal issues in the future.
Prepare Your Property for Renting
To attract quality tenants, you need to make sure that your property is clean, well-maintained, and in good condition. Before listing your property, take the time to make any necessary repairs, replace old appliances, and give it a fresh coat of paint. You should also consider hiring a professional cleaner to give your property a deep clean.
Set the Right Rental Price
Setting the right rental price is crucial to attracting quality tenants and maximizing your profit. You should research the rental rates in the area and price your property competitively. However, you also need to consider your expenses, including mortgage payments, property taxes, insurance, maintenance, and repairs.
Screen Your Tenants Carefully
Finding the right tenants is essential to the success of your rental property business. Before signing a lease agreement, you should conduct a thorough background check on prospective tenants, including their credit history, criminal record, employment status, and rental history. You should also require references from previous landlords.
Create a Comprehensive Lease Agreement
A comprehensive lease agreement is crucial to protect your rights as a landlord and minimize the risk of legal disputes. Your lease agreement should include all the terms and conditions of the tenancy, including the rental price, payment due date, lease term, security deposit, maintenance responsibilities, and eviction procedures.
Maintain Good Communication with Your Tenants
Maintaining good communication with your tenants is essential to avoid misunderstandings and ensure that your property is well-maintained. You should provide your tenants with a way to contact you in case of emergencies and respond promptly to their requests or complaints. You should also schedule regular property inspections to ensure that your property is in good condition.
Hire a Property Manager
If you have multiple rental properties or you don't have the time or expertise to manage your property, you should consider hiring a property manager. A property manager can take care of all aspects of your rental property business, including finding tenants, collecting rent, handling maintenance and repairs, and resolving disputes.
You should think about owning a rental property like running a business. The rent collected on a rental property is your revenue and will be subject to income tax, but the available write-offs are extensive. Mortgage interest, property taxes, insurance, advertising, maintenance, property depreciation, and other expenses are typically tax-deductible. The cost of a property manager and a tax accountant can also be deducted. You should be aware that the IRS views repairs and improvements differently. Repairs are considered an expense as they do not increase the overall value of the property. However, improvements that add value and prolong their useful life are considered capital investments and can only be recovered through depreciation over time.
Because a rental property is a capital asset, you may be required to pay capital gains when it is sold. If you sell the property for more than you paid, you have realized a capital gain. If this gain cannot be offset by capital losses, you will have to pay capital gains tax on this amount.
Get Help from a Tax Professional
It's essential to have a good understanding of the tax implications of owning a rental property in Des Moines, Iowa. This is where a tax professional can be an asset. A tax professional can help you understand the tax deductions available for rental property owners, such as depreciation, repairs, and maintenance expenses. They can also help you keep track of your income and expenses, file your taxes correctly, and avoid any potential legal issues related to taxes. By working with a tax professional, you can ensure that your rental property business in Des Moines is financially sound and compliant with all the relevant tax laws and regulations.
Owning a rental property in Des Moines can be a profitable and rewarding investment, but it requires a significant amount of research, preparation, and management skills. By following these tips and tricks, you can maximize your profit and minimize the risks of owning a rental property. Remember to conduct extensive research, prepare your property for renting, set the right rental price, screen your tenants carefully, create a comprehensive lease agreement, maintain good communication with your tenants, and hire a property manager if necessary. With the right strategy and mindset, you can make your rental property business a success.
Tax and accounting services provided through Boelman Shaw & Company, LLC. Advisory services provided through BSC Capital Partners, LLC a state of Iowa registered investment advisor.