Details to Check When Purchasing a Rental Property in Grand Rapids, MI
We put together a list of things we feel are important when looking to purchasing rental property in Grand Rapids, MI. These may not be deal breakers for you, but they are things that we see investors miss when looking at a property.
Is the property vinyl sided? Is it wood sided? Wood siding means more upkeep with scraping and painting using lead based paint practices. This is more costly for the owner to keep up. Sometimes the siding is vinyl but the windows haven’t been wrapped. Scraping and painting windows can also be costly using lead safe practices.
What is the condition of the deck, concrete, roof, driveway, etc? These can all add up big time in the long run.
Maybe there is a lot of grass to mow and it is a multi-family. Don’t forget to budget a higher than normal cost for mowing.
We see tenants paying attention to windows because they know that leaky windows are not energy efficient. Especially in West Michigan where it can get really cold during the winter months! We also see a lot of these old windows that are no longer repairable. Some of our owners will decide to replace a couple of windows each month for cash flow reasons. Simple Home Management’s property managers have seen that many homes in Grand Rapids MI still have old drafty windows.
Kitchens and baths can be costly to replace. Since people buy AND rent based on kitchens and baths, we suggest having a nice, function kitchen and bath(s) in the property. Also remember that kitchens and baths need a refresh every so often.
Be sure when you are walking through the property to check around for any types of bugs that shouldn’t be there. On a single family home, exterminating can be much easier than a multi-family home. Maybe there are bugs because of the tenant living conditions. On a larger property with multiple units, bugs can get costly to exterminate. Do not forget to budget this when looking at your numbers!
Layout of the Units
Be sure to look at the layout of each unit and make sure it is functionally good for the potential tenant. For example, a property that has the bathroom 3 floors up in the attic is not functionally sound for tenants. Units that have the bathroom between both bedrooms can be harder to rent. Make sure the kitchens are functional with enough storage space and counter space for the tenant when purchasing rental property.
Be sure to look at the lease agreements. You will want written lease agreements in order to have legal authority. For example, a tenant may say “Well Sally used to let me pay by the 15th of the month”. If you have the lease contract you will be able to point to the due date in the lease. We have even seen life long leases. A life long lease means you are stuck with that tenant (at that rental rate) unless he or she gets evicted. It could be a two year lease, but the owner pays all utilities. No one likes paying utilities!
Utilities When Purchasing Rental Property
You will want to check out the utilities on the property and find out if they have split utilities or not. Some duplexes do not have split utilities which means you are stuck paying those bills. Because of this, the tenant does not always pay attention to utility usage. One larger multi family properties, gas is a lot of times included, but not always.
Be sure to check out the income and expenses for the property. Is rent rarely collected? That means you may have to do an eviction and remodel the unit(s) right away. The expenses could be high because the owner remodeled a unit earlier in the year. They also could have had an expensive city inspection that year.
You will want to make sure that the property you buy is going to go up in value and rental rate. If the rental rate only tops out at $500 per month, you may want to rethink it. Is the surrounding area going to allow you to have a good enough rental rate for the property to cash flow? Those are a couple ways of looking at rental rates when purchasing a property in West Michigan. As a Grand Rapids Property Manager, Simple Home has seen rental rates increase in the last couple of years.
Take a look at the current tenant situation. If you buy a four-unit building and the first thing you will need to do is evict two of the tenants, your budget changes. If all four units are rented, paying, and have a solid lease in place, the budget may change.
Do you have any questions about purchasing rental property? Contact us today!
We can also refer you to a trusted realtor to help you find the property that works for you!