Within a few months of your lease ending, your landlord or property manager may ask if you would like to renew your lease. If you’re happy with your apartment and want to stay, here’s what you need to do:
Review your lease
First and foremost, you need to know when your lease is up. Take a look at your copy of the apartment lease and note the termination date. Mark this date on your calendar.
Find out when you need to notify your apartment manager of your decision to renew your lease or move out. Do you need to notify them 30 or 60 days in advance? Mark that date on your calendar. If you miss that date, the lease could auto-renew forcing you to keep paying for the apartment.
Talk to the landlord
Before the deadline to renew or terminate your lease, talk to your landlord or apartment community manager about your options. If the rental rate is changing, you should be informed. Don’t be afraid to negotiate on the rent.
If you like your apartment community, but find you need more or less space, inquire whether you can move to a different unit within the community. Make sure that all agreements are put in writing; these terms should be reflected in the new lease.
Make your decision
Once you have all this information gathered, you can make an informed decision about how you want to proceed. Decide whether or not you want to renew your apartment lease.
Write a letter
Once your rental decision is made, submit a letter to your apartment management team informing them of your decision to renew or terminate your lease. If you have made any special arrangements with your apartment manager for a deal on a rental rate or a move to a new unit in the community, include this information and any supporting documents. Keep a copy of these documents for yourself.
Read your new lease carefully
If you have decided to renew your lease, you most likely will be asked to sign a new lease. This lease will reflect any change in terms and designate the period of the new agreement (one or two years, or month to month, for instance.) Read the new lease carefully and make sure that you are comfortable with the language.
Sign the new lease
Once you have thoroughly read the new apartment lease and are comfortable with the terms, sign the document to make things official. An official apartment community representative will sign it, as well.
Related:
Tips for negotiating lower rent
Why apartment prices fluctuate
Kari Lloyd has been a freelance writer for over 15 years. A Chicago native and recent transplant to Atlanta, Kari spent 10 years living in London, UK where she worked as a music journalist and restaurant reviewer.
And why isn’t the amount the same at every community?
There are a few variables that determine that number.
What is the average security deposit for an apartment?
On average, the security deposit is equal to one month’s rent. So, you want to keep this number in mind when calculating how much money you’ll need to give your landlord at move-in. Many landlords require the security deposit and first month’s rent (and sometimes last month’s rent too) before they’ll give you keys.
Landlords set security deposits to protect them from damage and non-payment. Security deposits are set based on four important factors: State law, cost of monthly rent, included amenities (elevator, W/D in unit, private parking, furnished vs. unfurnished, doorman on site, new renovations) and market competition. When anticipating how much a security deposit might be, consider those factors when making an estimate. State law may limit how much a landlord can set a security deposit for, so it is always a good idea to check into your local legislation if you feel the security deposit set was too high.
Coming up with this amount of money may seem overwhelming. But, remember that if you’re in an apartment now, and you haven’t damaged it, you might a security deposit coming back to you. You should receive it within 30 days after you move out. (If you’ve earned its return, but you don’t receive it within 30 days, contact the office).
Where can I find the security deposit amount for a unit?
The amount owed for security deposit should be on the application, and must be on the lease. Before deciding on an apartment, make sure you have the dollar amount of the security deposit in writing.
See also: What you could need for the application process
How much can a landlord charge for a security deposit?
That’s up to the landlord. The average is one month’s rent, but some will charge up to three month’s rent. Most states have a limit to what can be charged, but there are some states that have no maximum.
If everyone else in the area is charging one month’s rent for security deposit, the landlord may want to do the same, to lease the unit. If you’ve seen evidence of that, take it with you in order to negotiate.
Why would a landlord charge more than one month rent for the security deposit?
Some property management companies have a policy that the deposit is 1.5 or two times the monthly rent. However, another reason your deposit may be quoted as higher is due to your less-than-perfect credit history. The landlord may want to rent to you but must offset the risk by charging you a higher security deposit.
Can my security deposit be used as rent?
Your security deposit is not meant to be used to pay your last month’s rent. When the time comes for you to move, you cannot ask your landlord to use your deposit to cover full or prorated rent. However, if you paid first and last month’s rent in lieu of – or in addition to – a security deposit, then you have, in fact, already paid for your last month, and shouldn’t be required to pay for your final month at the time, since you already did so up front.
Pet deposits
If your landlord allows your pet to move in, there will be an additional pet deposit due before the landlord gives you the keys. If your dog or cat is a service or therapy animal, the pet deposit should be waived with a doctor’s note. Bear in mind, you are still financially responsible for any damage your service or therapy animal does to the apartment.
Pet deposits are either refundable or non-refundable. If your landlord doesn’t charge a pet deposit, it may be because they charge monthly pet rent. This can be anywhere from $10 – $30 depending on the type of property and location. Some landlords will charge pet rent in addition to a security deposit, so make sure you ask about the pet charges up front.
When is the security deposit less than one month’s rent?
Some low-income tax credit properties have lower security deposits for those with good credit. In a market-rate complex, a lower security deposit might be offered to incentivize more people to move in.
Paying the security deposit and the first (and sometimes last) month’s rent can be tough, but it’s part of moving. Just remember, you do get your deposit back if you leave your unit in good condition when you move out. It’s part of the business. Once you get that part out of way you can focus on making your new apartment feel like home.
How do I get my security deposit back?
Getting a security deposit back can be difficult when dealing with some leasing companies. Here’s the best way to ensure you will get most – or all – of your security deposit back:
Take pictures and make notes during initial walk-through. Make sure you agree to everything that is listed on the walk-through sheet before you sign it.
Repair any and all damage that is your responsibility before you move out.
Read your lease carefully and make sure to follow all of the stipulations for moving out. This may include having carpets professionally cleaned and providing a receipt upon your move-out. Make sure you don’t miss these little, and often hidden, stipulations. It could end up costing you a lot more money in the end, as landlords often up-charge for these services if they have to do it themselves.
Follow your move-out process to a tee, including writing and delivering a proper Notice of Intent to Vacate.
Replace any broken blinds yourself.
Before filling any nail holes, make sure that your landlord intends to repaint after you leave. Landlords are supposed to do this, but some don’t. Those filled nail holes could cost you in the end.
Take pictures and document everything you do. Keep receipts to prove that you left your old place in tip-top shape, minus regular wear and tear.
Bekah Steenbock is a freelance writer with a background in real estate and business growth. She is a native Austinite, but has called Seattle, Mankato,
Milwaukee, Las Vegas and Atlanta home. Bekah, her husband and their three children love exploring the outdoors in their spare time.
The U.S. Department of Housing and Urban Development (HUD) announced today that lenders will now be able to count income from ADUs when underwriting FHA loans.
Doing so may allow many more home buyers to qualify for a mortgage, even if the ADU doesn’t yet exist!
The new guidelines are part of the Biden-Harris Administration’s Housing Supply Action Plan, which aims to increase access to homeownership by addressing affordable housing challenges.
It also speaks to the immense affordability challenges in today’s housing market, driven by a severe lack of available for-sale inventory and much higher mortgage rates.
Ideally, the growing popularity of ADUs addresses these concerns by increasing the housing stock and easing mortgage qualification.
New ADU Rule Aims to Ease Affordability Woes and Increase Housing Stock
The new FHA rules regarding accessory dwelling units (ADUs) will help more borrowers qualify for a home loan when purchasing a property with an ADU.
They will also make it easier to add an ADU to an existing structure, or construct new homes with ADUs, because it’s being extended to the FHA 203k loan and FHA construction loan.
The revised FHA policy allows lenders to count income (rent) from these small housing units that are built inside, attached to, or on the same property as a primary residence.
Additionally, the presence of these housing units will effectively increase the supply of affordable housing and help families create generational wealth via homeownership.
Per the FHA, an ADU is “a single habitable living unit with a means of separate ingress and egress that meets the minimum requirements for a living unit.”
It “is a private space that is subordinate in size and can be added to, created within, or detached from a primary one-unit single-family dwelling.”
Using ADU Income to Qualify for an FHA Loan
Those who purchase a property that features an ADU will now be able to use 75% of the estimated ADU rental income to qualify for an FHA-insured mortgage.
The income is the lesser of the fair market rent reported by the appraiser or the actual rent reflected in the lease or rental agreement.
For example, if the ADU on a property will be rented for $1,000 per month, the borrower can use $750 of that income (added to their total gross income) to qualify for the mortgage.
This will lower their debt-to-income ratio (DTI) and potentially turn a declined file into an approved one.
While DTI ratios of 31/43 are generally the limit for an FHA loan, this would effectively lower the borrower’s ratios and boost their chances of approval.
It differs from so-called boarder income, which is income derived from an individual living in the primary dwelling, such as a roommate.
It should be noted that the amount of the rental income derived from the ADU must not exceed 30% of the total monthly income used to qualify the borrower.
In other words, their primary source of income shouldn’t be the ADU itself, for obvious reasons.
Borrowers who use ADU rental income to qualify must also verify and document two months of reserves (PITI).
Of note, the rental income from the ADU cannot be used to qualify for a cash out refinance.
See all the pertinent guidelines in Mortgagee Letter 2023-17.
You Can Use ADU Income Even If You Don’t Have an ADU on Your Property
Yes, you read that correctly. Even if the property you buy doesn’t have an existing ADU, you can use estimated rental income to qualify for an FHA loan.
The caveat is that you can only use 50% of the proposed income, and you must construct an ADU via the FHA’s Standard 203k loan program.
The new ADU can be attached to the existing structure, such as in a garage or basement conversion.
Using our same example of $1,000 in monthly rent, the borrower would gain $500 in monthly income to push down their DTI ratio.
Lastly, ADUs are being added to the types of improvements that can be financed when using an FHA loan for new construction.
This is intended to spur accessory dwelling unit production by allowing more new homes to be built with them from the ground up.
To that end, the new changes also include ADU-specific appraisal requirements to help determine the rent that can be generated.
And appraisers will identify and analyze ADU characteristics to more accurately determine the market value of a property that contains an ADU.
This too should advance the adoption of ADUs as more cities and states approve of their use.
FHA-approved lenders can implement the new ADU policies effective immediately.
When the housing market was searing hot, buyers faced intense competition — bidding wars, cash investors, and buy/sell decisions made on rapid deadlines. Now that real estate has cooled, there are fewer homes for sale, two-decade-high interest rates, and stubbornly elevated house values.
It’s rarely easy to buy a home. And if you can find a house you love, the question becomes: Is now a good time to buy?
The 2023 housing market
Looking for the perfect time to buy? Fewer than one in five consumers surveyed by Fannie Mae in July 2023 thought that it was a good time to buy a home. Yet, timing the housing market is more complicated than timing the stock market. Which is impossible. There are few “just right” Goldilocks real estate markets.
But you’re not buying the market. You’re buying a house in a city, neighborhood, and block where you want to live. Hopefully, for quite a while.
Mortgage rates
We all know this story. Interest rates have risen — and mortgage rates are no exception. The Federal Reserve has been raising short-term interest rates for well over a year in an effort to shrink inflation — the rise in consumer prices. Not only do the Fed’s rate increases immediately lift short-term mortgage rates such as variable-rate loans, but they also tend to influence long-term mortgage rates upwards as well eventually.
And though we don’t live in a 2%-3% world these days, mortgage rates are near their 52-year historical average.
Since April 1971, the 30-year mortgage rate has averaged 7.74%, based on data collected by Freddie Mac.
Of course, that’s little comfort to homebuyers today who remember when rates were under 3% for much of 2021. Conversely, the highest rate on record was a whopping 18.63% in October 1981.
According to Zillow research, the trend of mortgage rates — whether interest rates are generally rising or falling — may influence whether existing homeowners would consider selling their existing house to move into another. With so many existing homeowners paying a much lower mortgage rate, the study found it would take rates to fall somewhere to between 4% and 5% before they would sell the home they’re in and buy another.
This rate gridlock is contributing to the lack of existing homes for sale.
Take action: Consider the interest rate strategies below until (and if) mortgage rates fall significantly lower for an opportunity to refinance.
Home values
There is a little good news, though. Higher mortgage rates have softened the real estate market, and the increase in home prices is moderating.
The rise in existing home values is slowing. Home values are lower year-over-year in almost half (23) of the 50 largest metro areas, according to a Zillow analysis.
Take action: Look for homes with price reductions where you want to live. Then negotiate even harder.
But listings for existing homes are far fewer. For more than 12 months, new listings have been down year-over-year. The number of new listings of homes for sale is down more than 20% from pre-pandemic levels, according to Realtor.com.
Take action: Consider expanding your search to more affordable areas close to your favorite neighborhood if it’s too pricey.
New home inventory is rising. Construction of new homes is showing promise of growth, according to the U.S. Census Bureau. However, builders are still wary of oversupplying the market, concerned that consumer demand could sag as potential buyers shy away from rising mortgage rates.
Take action: If you want to buy a house now, consider new construction. You may be able to choose some finishes or make an even better deal on a spec home that’s been on the market for a while.
When is a good time to buy a house?
Buying a home is more than considering macroeconomic factors. It’s an important life decision based on your personal and financial situation.
Where do you want to be in 5 years?
When you rent, the decision to move is broken down into six months, or a year or two at a time, as your lease renews. But every dollar-related detail makes a home purchase a medium- to long-term investment. Buying a house includes various costs: the down payment, closing costs, and financing fees, moving expenses, property taxes, and perhaps selling your existing place.
Homeownership requires a years-long timeline. How you make a living, your friends, family, and even community amenities all come into play.
Your income
A primary consideration: your job. Will it require a location change anytime soon, or can you live where you please? Is your income steady and all but assured?
Your credit score
One of the significant factors that will qualify you for a home loan is your credit score. It’s important to know it before applying for a mortgage.
For the most common loan, a conventional mortgage not backed by a government agency, you generally need a FICO score of 620 or better.
FHA loans can allow a credit score as low as 580 with 3.5% down. VA loans issued to qualified military service members and veterans don’t officially have a minimum credit score, though some lenders will require a FICO score of 620.
As a benchmark to where you stand, the median credit score on a new mortgage in the second quarter of 2023 was 769, according to the New York Federal Reserve.
Of course, minimum scores are the entry-level to qualifying; the higher your score, the better the loan terms you’ll be offered. Most importantly, that can mean you’ll pay a lower annual percentage rate over the life of the loan. You may also have more room to negotiate on fees.
Your current debt load
A primary financial metric lenders will use to determine your creditworthiness is your debt-to-income ratio.
Fannie Mae, a government-sponsored entity that provides liquidity to the home loan market, looks for a maximum total DTI ratio of 36% of “the borrower’s stable monthly income.” Exceptions can allow for total DTIs up to 50%, but it’s usually best to avoid working on the edges of qualification if you can.
You can calculate your DTI by dividing your total recurring monthly debt by your gross (before taxes and other deductions) monthly income.
Include debt such as monthly mortgage payments (or rent), real estate taxes, and homeowner’s insurance. Also, add any car payments, student loans, and the monthly minimum due on credit cards. Remember any personal loan payments and child support or alimony.
Do not include debt such as monthly utilities — like electricity, water, garbage, or gas bills — or car insurance, television streaming subscriptions, or cell phone bills. You can also exclude health insurance costs and miscellaneous expenses such as groceries or entertainment.
Your savings
Having a cash cushion in the form of emergency savings shows lenders that you are prepared for the unexpected. Of course, that savings account should also include …
Your down payment
A large chunk of your savings account should be dedicated to the down payment. A minimum of 3% down is required in order to qualify for a conventional loan targeted to first-time homebuyers — or ideally, 20% to avoid private mortgage insurance. Yes, zero-down options exist if you are eligible for a VA- or USDA-backed loan.
According to Realtor.com, the average down payment in the first quarter of 2023 was 13%.
4 rate-relief strategies to consider
Buying a house when interest rates are high can require some financial finesse to enhance affordability.
1. Buying discount points
Prepaying interest in order to lower your ongoing mortgage rate is called buying discount points. One point is equal to 1% of the loan amount. However, lenders sometimes add a point or two to a mortgage proposal to make their loan offer appear more enticing. But you’re actually paying for the discount with an upfront fee.
When shopping for a loan, compare loan offers with zero points. Then, you can decide whether to buy points to lower your interest rate. It is important to note that buying one point (paying 1% of the loan amount upfront) will generally reduce your interest rate by only one-quarter of a percentage point.
2. An interest rate buydown
Borrowers can lower their mortgage interest rate for the first few years at the beginning of the loan term with a buydown. Home builders, sellers, and some lenders sometimes offer an interest rate buydown to boost sales.
While you get a short-term break on the interest rate, your payments and total interest may actually be higher. It’s a strategy that requires running the numbers on the long-term benefits.
If you’re paying for the buydown, compare a mortgage both with and without a buydown. By the way, lenders will qualify you based on the permanent interest rate, not the temporary buydown rate.
3.An adjustable-rate mortgage
A mortgage product that increases in popularity whenever rates begin to rise is back: the adjustable-rate mortgage.
ARMs have a fixed interest rate for an introductory period, often five to 10 years, and then the rate changes regularly, usually once or twice a year. Tips when shopping for an ARM:
Look for an introductory rate that is lower than a fixed-rate mortgage.
Choose a term you feel comfortable with, perhaps in line with how long you plan to stay in the home.
Make sure you budget for possible increases in your monthly payment if the interest rate moves higher after the end of the introductory rate period.
4. A shorter-term mortgage
Are you more comfortable with an interest rate that never changes, even if your monthly payment is slightly higher than you’d like? Consider a shorter-term loan. Mortgages with 20- or 15-year fixed terms, as opposed to the traditional 30-year term, typically come with lower interest rates. The lower rate and shorter term combination means you’ll gain equity in your home faster, too.
Your next move
Buy smart and shop a lot. Relentlessly shop mortgage rates and lenders for the best loan offers and justified fees. Get a written preapproval from your lender, then shop for a house you can love and can afford. Your home buying competition is.
According to Zillow, when it comes to first-time buyers versus repeat buyers, first-timers are more likely to reach out to at least three lenders and three real estate agents.
Rent prices are on the rise, with the average cost increasing 18% between 2017 and 2022. But buying a home requires a hefty down payment and good credit. Renting to own your home can give you the best of both worlds, but there are some downsides.
If you’re thinking about signing a rent-to-own agreement, it’s important to weigh the pros/cons of rent-to-own home deals. Here’s what you need to know before you sign on the dotted line.
What are rent-to-own homes?
When you own a home, part of your monthly payments goes toward paying off the principal. If you stay in the home long enough, you’ll own it.
The same doesn’t apply to rentals. Your monthly rent solely covers your costs of living in that home, whether it’s a condo, apartment, townhouse, or single-family house.
A rent-to-own home lets you pay rent to live on the property, with the option to buy it when the lease runs out. In some cases, a portion of your rent goes toward the purchase price, but that isn’t always the case.
How does rent-to-own work?
A rent-to-own agreement is essentially a lease agreement with an option to buy. Rent-to-own contracts should be read thoroughly. Those options can vary from one contract to another.
When you sign a rent-to-own contract, you pay an upfront fee called an option fee. This is typically 1 to 5% of the home’s purchase price, and it’s non-refundable.
It’s important to note that a lease does not relieve you of the requirements to buy a house. You’ll still have to qualify for a mortgage and make a down payment. It’s merely a way to buy yourself some time and possibly put some of your rent toward the purchase price of a home.
Lease Option vs. Lease Purchase
Before you sign, pay close attention to the lease agreement you’re signing. There are two types, and one contractually obligates you to buy the property.
Lease Option Agreement
A lease option agreement is the best deal of the two for you, the buyer. You’re signing a lease option contract that merely gives you first rights to the house when the lease is up. If you change your mind, find a better deal, or can’t qualify for a mortgage, you can find somewhere else to live and move your belongings out.
Since the option fee is nonrefundable, it’s important to note that you will lose money if you choose not to buy. Calculate this loss when you’re deciding whether to buy.
Lease Purchase Agreement
Unlike a lease option agreement, lease purchase agreements obligate you to buy at the end of the lease. Since it’s a contract, that means you’re legally obligated to purchase the house.
This can be risky for a couple of reasons. Once you’re in the house, you may see issues you didn’t notice when you were first touring the house. Things could change with the neighborhood or your circumstances that you couldn’t know at the outset.
But the biggest issue with a lease purchase contract could simply be that you aren’t eligible for a mortgage to buy the house. Make sure you know, up front, what penalties or liabilities you’ll face if you can’t buy the house when your lease is up.
Even though both agreements operate differently on your end, they do obligate the seller to give you the option to buy when your lease expires. This puts you in a position to own a home at a predetermined future date, giving you the opportunity to start planning.
Length of a Rent-to-Own Agreement
Rent-to-own contracts start with a lease period that can be up to five years but is usually less than three. The thought is that the rental period will give a renter time to qualify for a mortgage. During this time, you’ll work on building your credit, if necessary, and saving for a down payment.
In some cases, a rent-to-own arrangement could have renewal terms. That means if you reach the end of the lease and want more time, you can extend the lease. With this option, though, the property owner could increase your monthly rent or the purchase price.
Preparing for Homebuying
During your lease term, you’ll make each monthly rent payment in exchange for remaining in the house. But it’s important during that time that you work toward purchasing the house when your time is up. Here are some things to do to boost your chances of landing a mortgage once your lease expires.
Boost Your Credit Score
Your rent-to-own deal requires that you qualify for a mortgage once the term is up. To do this, you will need to meet the minimum credit score requirements. You can get a free copy of your credit report each year at AnnualCreditReport.com, but there are also credit monitoring services that can help you stay on top of things.
Although requirements can vary from one lender to the next, Experian cites the following credit scores as necessary to land a mortgage:
FHA: If you qualify, a Federal Housing Association loan will accept credit scores as low as 500.
USDA loans: Those who meet the requirements can qualify with a score as low as 580.
Conventional loan: Generally 620 or higher, but some lenders require 660 at minimum.
VA loans: Eligible military community members and their families can obtain loans with scores as low as 620.
Jumbo loan: These loans cover houses at a higher price, so you’ll need a score of at least 700.
Save for a Down Payment
In addition to a good credit score, you’ll need to put some money down on your new home. Down payment requirements vary by loan type, but it’s recommended that you put at least 20% down. That means if you’re buying a $200,000 home, you’ll need at least $40,000 by closing.
There are lower down payment options, but if you choose those, your mortgage payments will include something called private mortgage insurance. This will increase your monthly payment by $30 to $70 per $100,000 borrowed.
If you can’t save up 20%, you may qualify for an FHA loan, which requires as little as 3.5% down. Both VA and USDA loans have zero down payment options, and there are programs offering down payment assistance to those who qualify.
The best part about rent-to-own properties, though, is that some come with rent credits. With a rent credit, a percentage of your rent will go toward your required down payment. Calculate in advance how much you’ll have in that escrow account at the end of your lease to make sure you save enough to supplement it.
What are the pros of rent-to-own?
Rent-to-own homes can be a great option, especially during a tight housing market. If there’s a house you want to buy, but you can’t make a down payment or your credit isn’t where it should be, it could be a great workaround. Here are some of the biggest benefits of rent-to-own agreements.
Rent May Go Toward Purchase Price
Depending on the terms of the rental agreement, renting to own could help you work toward paying for the home. Instead of the full amount of your rent being pocketed by a landlord, a percentage of your rent could go toward the eventual purchase price. Before signing, pay attention to rent credits and try to negotiate the best deal possible.
The Purchase Price Is Locked In
When a landlord agrees to a lease option, the home’s purchase price is written into the contract. That price will typically be higher than what the market says it’s currently worth. This means if the U.S. housing market sees an unexpected increase, you’ll be buying the home for less than its value. Even if the market dips, once you purchase the house and remain there for a few years, you may be able to sell it at a profit.
You’ll Buy Extra Time
For many renters, the rent-to-own period provides time to qualify for a mortgage. If you’ve researched all the options and found you’re close but not quite there yet, a rental period could be just what you need.
Before you choose this option, though, take a look at your circumstances. If substantial existing debt and poor credit mean you won’t qualify, you may need more than the few years you’ll get with a rent-to-own agreement.
No Moving Necessary
Let’s face it. Moving can be a pain. You have to pack everything up, line up a moving truck and get help moving, and unpack your items once you’re in the new location.
With a rent-to-own agreement in place, you skip the hassle of moving. You’ve already been in that home, making monthly rent payments, for at least a couple of years. You’ll simply go through the closing process and switch from rent payments to mortgage payments.
What are the cons of rent-to-own?
If you can get a mortgage, that’s always going to be a better option than renting or leasing to own. But there are some instances where renting without the buy option could be better for you. Here are some things to consider.
Rent-to-Own Home Maintenance
Before you sign any lease agreement, it’s important to read the fine print. One thing to note, specific to own agreements, is who will be responsible for maintenance during the rent-to-own period. If you rent without the promise of eventual ownership, your landlord will take care of those costs. In some cases, rent-to-own agreements require the renter to handle all repairs.
But there’s an upside to handling repairs on your own. To your landlord, the property is technically yours. That means you likely will give it more TLC. Still, it’s well worth it to pay for a home inspection before you agree to a rent-to-own agreement. This will identify any serious issues that will need to be addressed before you buy.
Option Fee
One distinguishing feature of a rent-to-own property is the option fee. This is usually between 1 and 5% of the purchase price and is non-refundable. That means if you don’t ultimately qualify for a mortgage, you’ll lose that money.
Home Values Could Drop
Property values aren’t guaranteed. Your landlord estimates the value of the property, but if you’re in a rising market, you might get that home at a steal. While that’s good news for you, the reverse can happen. If housing prices drop substantially during that time frame, you could find yourself buying a property for more than it’s worth.
Contract Breaches Can Be Costly
Rental agreements are a legal obligation. If you don’t pay your rent, your landlord can evict you and keep your security deposit. But rent-to-own contracts bring an additional level of risk. Missed payments mean you could be evicted and lose all the money you’ve put in. That includes the upfront fee and any rent credit you’ve earned.
All that money will also be lost if you can’t qualify for a mortgage when your rental time is up. These agreements can give you some breathing room. However, if your low credit scores, income, lack of a down payment, or employment situation make you ineligible for a mortgage, you could be searching for another rental while losing everything you’ve paid on the lease-to-own home.
Steps to Buy a Rent-to-Own Home
Once you’ve decided renting to own is the route you want to take, you may wonder what to do next. The following steps can help you ensure you get the best deal in a rent-to-own agreement.
1. Find a Home
This is more challenging than it might sound, especially if you’re looking in a competitive real estate market. Rent-to-own homes are extremely rare, so you may have to find a home for sale and try to negotiate this type of setup.
Typically, homeowners become renters when they can’t sell their homes. This means your rent-to-own contract might be on a home that’s in a less desirable or convenient area of town. For someone whose home has been on the market for a while, being able to collect rent money with the promise of a sale in a few years can be a huge relief.
For best results, find a real estate agent who can help you track down a home and negotiate with the seller. The National Association of REALTORS® maintains a directory of real estate agents, but you can also ask for a referral or find real estate agents nearby who have brokered these types of deals recently.
2. Research the Home
Even if it’s tough to find a lease-to-own home in your area, don’t snatch up the first one you find. Crunch the numbers to make sure the rent and purchase price make financial sense for you. Look at the sale history of the home to verify that the owner’s estimated purchase price is somewhat within what the median home price will likely be when your lease expires.
3. Research the Seller
The seller needs to be looked into as well. This is even more important with rent-to-own agreements since this person will be your landlord for the entire lease period. If you see any red flags during your interactions with the seller, move on.
4. Choose the Right Terms
Before you make a real estate purchase, you would have a closing attorney review the documents. The same goes for a rent-to-own agreement. Run all the paperwork past a real estate attorney to make sure there’s nothing in the contract that will hurt you in the long run.
Your real estate agent should be able to negotiate the best terms for you, including how each rent credit will help you build equity and what happens at the end of the lease.
5. Get a Property Inspection
Any time you make a home purchase, it’s essential to know what you’re buying. The same is true for rent-to-own properties. A home inspector can check things out and make sure you aren’t purchasing a home with serious issues.
6. Start Preparing to Buy
Once you start making rent payments, it’s time to start preparing for your eventual home purchase. Chances are, you’ll have to make a sizable down payment on a home loan, so plan to have that ready. Also, keep an eye on your score with all three credit bureaus and make sure you’ll qualify.
A rent-to-own contract can be a good deal for both the buyer and the seller. It can give you time to save money and improve your credit score. A real estate lawyer should take a look at your contracts and make sure your best interests are protected.
Bottom Line
Rent-to-own homes present a unique option for potential homeowners. This approach offers the opportunity to enter the homeownership arena at a slower pace, allowing individuals to build credit, save for a down payment, and experience living in the home before making a final purchase decision.
However, the rent-to-own path isn’t free from drawbacks. Potential buyers should be wary of unfavorable terms, higher monthly payments, and the risk of losing money if they decide not to buy. Ultimately, like all significant decisions in life, choosing a rent-to-own option requires careful consideration and thorough research.
Frequently Asked Questions
Where can I find rent-to-own houses?
Rent-to-own houses can be found through specialized websites dedicated to these types of listings, local real estate agents familiar with the concept, or sometimes through classified advertisements in local newspapers or online platforms.
Can I find rent-to-own homes on Zillow?
Yes, Zillow does list rent-to-own homes. When searching for properties, you can filter the search results to show only rent-to-own options. However, availability may vary based on the region and market conditions.
How long is the typical rent-to-own contract?
The typical lease term ranges from one to five years, but terms can vary based on the agreement between the homeowner and tenant.
Do I have to buy the house at the end of the lease?
No, the decision to buy is optional. However, if you decide not to purchase, you may lose any upfront fees or additional monthly amounts set aside for the potential purchase.
Can the seller change the purchase price once set?
Generally, the purchase price is fixed in the initial agreement. However, some contracts may have clauses allowing price adjustments based on market conditions.
What happens if the property value decreases during the lease period?
If the home’s value decreases and you’ve agreed on a set purchase price, you could end up paying more than the current market value. It’s crucial to negotiate terms that protect your interests.
Who is responsible for repairs and maintenance?
The agreement should clearly outline these responsibilities. In most cases, the tenant bears the responsibility for maintenance and repairs during the lease term.
What’s the benefit of a rent-to-own agreement for sellers?
Sellers can generate rental income while waiting to sell, often at a premium. It also widens the pool of potential buyers, especially those who need time to improve their credit or save for a down payment.
How do property taxes work in a rent-to-own agreement?
In a rent-to-own scenario, the property taxes are typically the responsibility of the homeowner, as they still retain ownership of the property during the rental period. However, the specific arrangement can vary based on the terms of the agreement.
Some contracts may stipulate that the tenant pays the property taxes directly or reimburses the homeowner. It’s crucial for both parties to clearly understand and agree upon who will cover the property tax obligation before entering into a rent-to-own contract.
If I don’t buy, do I get a refund for the extra money paid?
Typically, the extra money paid above regular rent, often referred to as “rent premium,” is forfeited if you decide not to buy.
Is the rent in a rent-to-own agreement higher than usual?
Often, yes. A portion of the monthly rent may be used for the potential down payment or purchase price, making it higher than the average rent for similar properties.
What’s the difference between rent-to-own and mortgage?
Rent-to-own is an agreement where a tenant rents a property with the option to buy it at the end of the lease. No bank is involved initially, and the tenant isn’t obligated to buy. A mortgage, on the other hand, is a loan specifically for purchasing a property. The buyer borrows money from a bank or lender and agrees to pay it back with interest over a predetermined period.
Does rent-to-own hurt your credit?
A rent-to-own agreement, in itself, doesn’t usually affect your credit. However, if the homeowner reports late payments to credit bureaus, it could hurt your credit score. On the positive side, consistently paying on time and eventually securing a mortgage can benefit your credit.
What is another name for rent-to-own?
Rent-to-own agreements can go by various names, including:
Lease to purchase
Lease option
Rent-to-buy
Rent-to-purchase option
Lease purchase
Each of these terms represents the concept of renting a property with the potential option to buy it after a set period.
Before putting your stuff into storage and begging for a guest bed or couch from a friend, choose the vastly easier option and send your landlord a lease extension letter. There’s no guarantee that you’ll get one, but your landlord may agree to extend your lease end date if they haven’t rented your apartment to someone else yet.
What is a lease extension?
A lot of rental concepts are pretty complicated, but fortunately, this isn’t one of them. A lease extension is exactly what it sounds like — an extension on the length of time you’re allowed to stay in your rental. This can range from a few days to a few months, depending on what you work out with your landlord. You can expect to pay a prorated amount on your monthly rental rate for the additional time you occupy the space.
Asking for an extension
If you have a good relationship with your current landlord and you’ve been a model tenant, your chances are probably pretty good for getting an extension. It also helps if there isn’t a new tenant waiting to get into your apartment. It doesn’t benefit the landlord if the place sits empty, so you may get a lease extension so he or she isn’t out as much money.
The important thing to know when asking is to be professional and reasonable in your lease extension letter. If the landlord agrees to the extension, he or she is doing you a favor, so be polite, courteous and willing to negotiate.
Put it in writing
A lease is a legal document, so a lease extension letter request should be treated with the same level of importance. To request a lease extension, submit a formal letter containing all the pertinent details your landlord needs to make a decision. The letter should include:
Your name, current address and contact information
Date the lease extension request is submitted
Length of the lease extension, including the proposed end date
Reasons for extension
Date by which you need a decision, usually 10 days to two weeks
Putting your request in writing also keeps a record should any issues arise during the extension period.
Timing is everything
If possible, submit your lease extension letter 30-60 days before your lease end date. This gives your landlord enough notice so that when they find the next tenant, they can set their move-in date for when you’ve already left.
Give your landlord something in return
Be proactive in letting your landlord know that you’re willing and expecting to pay for this extended time. Calculate the daily rate of rent you pay based on a 30-day cycle, then offer a prorated rent based on the total days of your extension. So, if your monthly rent is $1,000 and you need to stay an extra week, the rent for the extension period would be $250.
This is a great place to start, and certainly a reasonable offer, but don’t be surprised if your landlord hikes up the cost of occupying the apartment during the extension — it’s a pretty common practice. Think of it as a convenience charge. The alternative to paying a little more is not having a place to stay, moving your things multiple times and wasting money on temporary storage space, so it’s worth it for just a short period.
Sample lease extension letter
Not sure what to say in a lease extension letter? Check out our downloadable example!
[Your Name] [Address] [City, State Zip Code]
[Date]
[Landlord’s Name] [Landlord’s Address] [City, State, Zip Code]
Lease Extension Request for [Rental Address]
Dear [Landlord’s Name],
Please accept this letter as a formal request for an extension to the lease for [Property Address]. Currently, the lease is set to expire on [date]. I would like to amend that date to end on [new date]. I propose to pay you the prorated amount of [extension rent amount] for the additional days that I will occupy the property.
I am asking for this extension because [insert reason here, for example: I am moving out of state, I am getting married, etc.] Your flexibility with my lease end date will make this transition time much more seamless.
I appreciate your careful consideration of this matter. Please respond to this letter with an answer in writing within two weeks [by date]. Feel free to contact me with any questions or to discuss this matter.
Sincerely,
[Tenant Signature] [Tenant’s Name] [Tenant’s Unit Number]
Prepare in advance
To avoid the potentially awkward situation of asking for a lease extension toward the end of your time in the apartment, consider adding a clause to your lease when you sign it that addresses this situation.
Often, the addition of this clause will include the length of time you can extend, a deadline to ask for the extension, as well as any change in rent that may occur. If it’s in the lease to begin with, the landlord is obligated to honor your request.
Regardless of how you word it in your lease, it’s important to read through the entire document carefully to ensure you’re protected as the tenant during the term of occupancy.
Nothing to lose, everything to gain
There’s no guarantee that your move-out date from your current place and your move-in date for your new apartment will be the same. Working with your landlord to negotiate a lease extension is one of the best options to keep your stress levels in check during your move, so don’t be afraid to ask. The worst thing your landlord will say is no!
A freelance writer based out of the Atlanta area, Alia has penned articles during her decade+ career for such sites as HowStuffWorks, TLC, Animal Planet, Zillow and many more. Her favorite things to write about include fitness, nutrition, travel, healthcare and general lifestyle topics. A graduate of the University of Georgia, Alia’s an avid Dawg, but she also loves reading, sewing, eating all things chocolate and playing sports with her husband, three boys and beloved border collie, Flash.
Many people are lured into the world of real estate investing by stories of millionaires who started their journey with no money down or no steady employment. But the reality is that making money in real estate isn’t easy; a good credit score, investment capital and steady income can help in the beginning.
You’ll also need to grasp the nuances of the local real estate market and learn how to manage financial aspects such as cash flow and property taxes. While real estate buying, selling, and renting may not be much like a game of Monopoly, it is possible to earn steady side income, supplement your retirement, or even build a full-time real estate investment business with the right tools, knowledge, and patience.
Unlike mutual funds, the stock market, cryptocurrency or many other investments, real estate is tangible. Real estate is a concrete asset—one can see, touch, and even reside in. That gives investors a sense of security. However, it also creates unique challenges.
Managed well, the stability and passive income from rental properties can be a safety net against more volatile investments.
This guide is here to clarify the process for beginners. It aims to empower you to make informed decisions, reduce risks, and lay a strong foundation for your real estate investing journey.
Benefits of Investing in Real Estate
The allure of real estate goes beyond the mere ownership of tangible assets. It presents a robust suite of financial benefits that have the potential to amplify wealth and provide stability in uncertain times. As we navigate the advantages, it becomes evident why many seasoned investors prioritize real estate in their portfolios.
Steady and Passive Income
Real estate investing, especially in rental properties, stands out for its potential to provide a consistent revenue stream. When you own a rental property, the monthly or quarterly distributions from tenants contribute to steady income, which can safeguard your finances against unexpected events or economic downturns.
This consistency contrasts with the often erratic nature of the stock market, which can fluctuate daily based on global events, company performances, and other factors. Additionally, for those aiming to attain financial freedom, the passive income generated from real estate can be a step closer to achieving that goal. Over time, as the mortgage payment decreases or remains static, rental rates may rise, increasing your monthly cash flow.
Appreciation Potential
Every investor dreams of their assets appreciating, and real estate often doesn’t disappoint. While there can be periodic downturns in the real estate market, historical trends suggest that properties generally gain value over the long run.
This means that not only can investors benefit from rental income, but they can also potentially see substantial gains when they choose to sell the property.
Tax Benefits
Navigating the world of taxes can be intricate, but real estate investors often find several advantages here. The ability to deduct mortgage interest and property taxes from taxable income can be a significant financial boon.
Furthermore, strategies like depreciation allow real estate investors to offset rental income, reducing their tax burden. Consulting with a financial advisor can help investors maximize these benefits and understand other potential tax advantages, such as 1031 exchanges or deductions related to property management.
Diversification
The saying “don’t put all your eggs in one basket” is sound investment advice. Diversification is a fundamental strategy to mitigate risks. By adding real estate to an investment portfolio, investors introduce a separate asset class that doesn’t directly correlate with the stock market or mutual funds. This can provide a buffer, ensuring that a downturn in one sector doesn’t wholly derail an investor’s financial trajectory.
Leverage
Leverage, in the context of real estate investing, refers to the ability to use borrowed capital to increase the potential return on an investment. When you purchase property with a mortgage loan, you’re often putting down only a fraction of the property’s total cost, while still reaping the benefits of its entire value in terms of appreciation and rental income.
This magnifies the return on investment, as the gains and income generated are based on the property’s total value, not just the down payment. It’s a powerful tool but should be used wisely. Over-leveraging or not accounting for potential rental vacancies can turn leverage into a double-edged sword.
Types of Real Estate Investments
As one dives deeper into the world of real estate, it becomes evident that this asset class is multifaceted, with various avenues to explore and invest in. The right choice often depends on an investor’s goals, risk tolerance, budget, and expertise. Here’s a closer look at some prominent types of real estate investments:
Residential Properties
Residential properties cater to individuals or families. They range from single-family homes to duplexes, triplexes, high-rise buildings with apartments, and other multi-unit properties. You may encounter the term “MDU” or “MUD,” which stand for multi-dwelling unit or multi-unit dwelling, to describe anything more than a single family home, or SFR (single family real estate).
Investing in residential real estate, especially the SFR market, is often a beginner’s first step due to its familiarity and the perpetual demand for housing. While these properties can be a reliable source of rental income, investors should be prepared for the challenges tied to property management, tenant turnover, and ongoing maintenance.
Commercial Real Estate
When one thinks of skyscrapers lining city horizons or sprawling office parks in suburban locales, that’s commercial real estate. These properties are tailored to businesses, and can include complete corporate headquarters or individual offices.
Commercial leases often run longer than residential ones, offering the potential for stable, long-term rental income. However, the entry point can be higher, with larger down payments and a more extensive due diligence process. Additionally, commercial real estate values can be closely tied to the business environment of the locality.
Industrial
Industrial real estate encompasses properties like warehouses, distribution centers, and manufacturing facilities. They’re integral to business operations, ensuring products move efficiently from manufacturers to consumers.
Investing in this sector can offer substantial rental yields, especially if the property is strategically located near transportation hubs. However, the nuances of industrial real estate, such as zoning laws and environmental concerns, necessitate a more in-depth understanding than residential or commercial sectors.
Retail
This sector includes shopping malls, strip malls, and standalone stores. What’s unique about retail real estate is that leases sometimes include a provision where the landlord gets a percentage of the store’s profits, termed as “percentage rent.”
In a thriving commercial area, retail properties can be quite profitable, with long-term leases and the potential for appreciating property values. However, investors should be mindful of shifts in consumer behavior and the evolving retail landscape, especially with the rise of e-commerce.
Multi-Purpose Commercial
A new breed of commercial real estate has emerged to compete with the growth of e-commerce. Multi-purpose commercial spaces blend housing units with office space and retail, often adding hospitality and entertainment venues.
Typically, these spaces are the domain of large real estate investment and property management firms. But if you invest in commercial office space or retail, you will be competing with these multi-purpose properties for tenants, so they are worth acknowledging.
Real Estate Investment Trusts (REITs)
For those not keen on direct property ownership, REITs present an attractive alternative. These are companies that own, operate, or finance income-producing real estate across various sectors. What makes REITs distinctive is that they’re traded on stock exchanges, similar to stocks.
By investing in a REIT, you’re buying shares of a company that manages a portfolio of properties, thus gaining exposure to real estate without the hassles of property management. Moreover, by law, REITs are required to distribute at least 90% of their taxable income to shareholders, leading to potentially attractive dividend yields. However, it’s essential to remember that like all publicly traded entities, REITs can be subject to market volatility.
9 Ways to Invest in Real Estate
Investing in real estate can seem tricky for beginners. But, with time and patience, anyone can master it. Focus on simple investment methods first to get to know your local property scene, meet experienced investors, and learn how to handle money wisely. As you learn and grow, you can dive into more complex investment options.
Here are some great ways for beginners to start in real estate:
1. Wholesaling
Acting as the bridge between property sellers and eager buyers, this method primarily focuses on securing properties at a rate below the prevailing market value. The secured contract is then transferred to an interested buyer, ensuring a margin for the wholesaler.
2. Prehabbing
Unlike intensive property renovations, prehabbing is about amplifying a property’s appeal through minimalistic enhancements. These properties, once given their facelift, usually attract investors with a keen eye for larger renovation projects.
3. Purchasing Rental Properties
An avenue promising consistent returns, this involves acquiring properties to lease them out. For those not inclined towards the intricacies of landlord duties, there’s always the option of hiring seasoned property management professionals.
4. House Flipping
A strategy that has garnered significant attention, house flipping involves a cycle of purchasing, upgrading, and promptly reselling properties, aiming for a profit. The emphasis is on swift transactions and keen market acumen.
5. Real Estate Syndication
Envision a collective where like-minded investors come together, pooling both resources and expertise. Such collectives venture into large-scale property acquisitions, and the ensuing profits or rental incomes are distributed among the participants.
6. Real Estate Investment Groups (REIG)
Primarily, these are conglomerates that steer their operations around real estate investments. By amassing capital from a plethora of investors, they dive into acquisitions of sizeable multi-unit residences or commercial holdings.
7. Investing in REITs
Real Estate Investment Trusts (REITs) revolve around the ownership and meticulous management of properties that yield income. However, investors don’t have to handle the management themselves. Instead, participants can relish the benefits of the real estate sector without the responsibilities of direct property ownership.
8. Online Real Estate Platforms
A fusion of technology with real estate, these platforms seamlessly connect potential investors with vetted property developers. This synergy enables backers to finance promising property ventures and, in exchange, enjoy periodic returns that encompass interest.
9. House Hacking
A blend of homeownership and investment, house hacking is about maximizing the potential of a multi-unit property or a single-family home. Investors live in one segment while leasing out the remaining portions. This dual approach can significantly reduce or even negate monthly housing expenses, serving as an excellent introduction to the world of property management for novice investors.
6 Steps to Get Started in Real Estate Investing
Starting on the path of real estate investing requires careful planning, due diligence, and a methodical approach to ensure that your investments are sound and have the potential for fruitful returns. Whether you’re dreaming of becoming a millionaire real estate investor or merely looking to diversify your investment portfolio, following a structured process can be the key to success. Here’s a step-by-step breakdown:
1. Assess Your Financial Health
Every investment journey should begin with introspection. As an aspiring real estate investor, it’s essential to have a clear understanding of your current financial standing. Ask yourself questions like:
How much capital am I willing to invest?
What are my short-term and long-term financial goals?
Do I have an emergency fund set aside?
Evaluating your risk tolerance is equally crucial. Some might be comfortable flipping houses, while others might prefer the steadiness of rental properties. Consulting a financial advisor at this stage can provide insights tailored to your financial health, enabling you to make informed decisions as you proceed.
2. Dive Deep into Market Research
Knowledge is power in the world of real estate. The local market can be significantly different from national or even statewide trends. Delve deep into understanding:
The demand for rental properties in your target area.
The average property values and rental rates.
The historical appreciation rates.
Any upcoming infrastructure projects or urban development initiatives.
Furthermore, familiarize yourself with real estate terminology. Phrases like “cap rate,” “loan-to-value,” and “operating expenses” will become a regular part of your vocabulary. The better informed you are, the more confidently you can navigate your investments.
3. Assemble Your Real Estate Team
No investor is an island. Success in the real estate business often hinges on the strength and expertise of your team. Look for professionals with a proven track record and positive reviews. Your team might include:
Real estate agents who understand the investor’s perspective.
Property managers to streamline tenant interactions and maintenance.
Lawyers specializing in real estate transactions.
Accountants familiar with the tax implications of real estate investments.
4. Explore Financing Options
The path to acquiring a property is paved with various financing methods. Traditional mortgages are common, but the real estate industry offers other mechanisms like:
Hard money loans.
Private money loans.
Real estate syndication where multiple investors pool resources.
Seller financing.
Each of these has different pros and cons, interest rates, and repayment terms. Understand each deeply to determine which aligns best with your financial strategy.
5. Analyze Potential Properties
The crux of real estate investing is ensuring that the numbers make sense. Before purchasing, assess the property’s potential for generating rental income. Break down:
Monthly mortgage payments
Property taxes
Maintenance costs
Potential vacancy rates
Your goal should be a positive cash flow, where the monthly income from the property (rent) exceeds all these expenses.
6. Negotiate and Close the Deal
Once you’ve zeroed in on a property, the negotiation phase begins. Here, understanding the property’s market value, any existing damages or repair needs, and the local real estate market dynamics can give you an edge.
When it comes to closing, be aware of all associated costs. These might include inspection fees, title insurance, and escrow fees. Being well-informed can help you negotiate these fees and ensure that you’re not overpaying.
Risks and How to Mitigate Them
Like any investment, real estate comes with its set of challenges and uncertainties. The difference between successful real estate investors and those who falter is often the ability to anticipate risks and prepare for them. Here’s an exploration of some prevalent risks in real estate and actionable steps to manage them:
1. Market Fluctuations
Real estate markets can be volatile, with property values rising and falling based on a myriad of factors.
Mitigation: To protect against market downturns, it’s essential to buy properties below their market value. Conducting comprehensive research and seeking expert investment advice can help investors make informed decisions. Remember, real estate is often a long-term game, so a short-term dip can be offset by long-term appreciation.
2. Unexpected Repairs and Maintenance
Properties can often come with surprises, from plumbing issues to roof repairs.
Mitigation: Regular property inspections can catch potential problems before they become major expenses. Setting aside a buffer fund specifically for maintenance can also cushion the financial blow of unforeseen repairs.
3. Vacancy Periods
There might be periods where your property remains unoccupied, leading to loss of rental income.
Mitigation: Properly vetting and building a good relationship with tenants can lead to longer lease periods. Diversifying your investment properties across different areas can also help, as vacancy rates might vary from one location to another.
4. Legal and Tax Implications
Real estate investors can sometimes find themselves entangled in legal disputes or facing unexpected tax bills.
Mitigation: Regular consultations with a tax professional or attorney familiar with the real estate industry can keep investors informed and protected.
Long-term Strategy and Growth
Real estate investing is not just about making a quick buck; it’s about building lasting wealth. Adopting a long-term perspective and continuously refining your strategy can pave the way for consistent growth in the real estate industry. Here’s how:
1. Define Your Real Estate Identity
Are you more comfortable with a buy-and-hold strategy, where properties are retained for long-term growth and steady rental income? Or do you thrive on the excitement of flipping houses, where properties are bought, renovated, and sold for profit? Understanding your preference can help tailor your investment strategy.
2. Reinvestment is Key
For those adopting a buy-and-hold strategy, reinvesting the rental income can substantially grow your real estate portfolio. By channeling profits into purchasing additional properties, investors can benefit from compounded growth.
3. Diversify Your Portfolio
As you gain experience, consider diversifying across various real estate sectors. Branching out into commercial real estate or exploring real estate investment trusts (REITs) can provide additional avenues for income and growth.
4. Continue Your Education
The real estate industry is continually evolving. By staying updated on market trends, attending seminars, and networking with other real estate professionals, you can adapt your strategy and seize new opportunities as they arise.
5. Scale Strategically
A real estate empire begins with just one property. With time, dedication, and a sound strategy, it’s possible to grow your holdings into a substantial full-time income. As you scale, ensure you’re not overextending; always prioritize the quality of investments over quantity.
Key Tips for Beginners
Embarking on a journey into real estate investing can be thrilling, yet the complexities of the industry can sometimes overwhelm beginners. Simplifying the learning curve is essential for novice investors to make informed decisions and find success. Here are some pivotal tips to guide those just starting out:
1. Start Small and Scale Gradually
Many millionaire real estate investors began their journey with a modest property. Purchasing a smaller, more manageable property as your first investment can help you navigate the nuances of the real estate business without being overwhelmed. As you gain confidence and experience, you can then venture into bigger and more diverse properties to scale your portfolio.
2. Prioritize Education
The world of real estate is vast and ever-evolving. Leverage online real estate platforms to learn about market trends, investment strategies, and financing options. Additionally, joining real estate investment groups can be invaluable. These groups not only provide mentorship but also offer opportunities to share resources, insights, and deals with other investors.
3. Location is Crucial
In the real estate realm, location often takes precedence over the type or condition of a property. A mediocre house in a prime location can fetch better returns than a grand mansion in a less desirable area. Research local market dynamics, neighborhood amenities, future development plans, and other location-specific factors before making an investment decision.
4. Networking is Key
Surrounding yourself with knowledgeable people can fast-track your learning process. By connecting with seasoned real estate investors, you can gain insights from their experiences, avoid common pitfalls, and even discover potential partnership opportunities. Attend local real estate seminars, join investor forums online, and participate actively in real estate conferences to grow your network.
5. Stay Updated and Adapt
The real estate industry is not static. Market conditions, property values, and investment strategies can change. Being adaptable and staying updated on industry trends will ensure you remain ahead of the curve and can capitalize on new opportunities.
6. Always Conduct Due Diligence
Before diving into any real estate transaction, thorough due diligence is imperative. From understanding property taxes and zoning laws to estimating potential repair costs and evaluating tenant profiles, leaving no stone unturned will protect you from potential setbacks.
8 Terms Beginner Real Estate Investors Should Know
Venturing into real estate can feel like you’ve entered a world with its own language. Don’t worry; everyone feels this way at the start. Knowing basic real estate terms can help you communicate confidently and make informed decisions.
Dive into these essential terms every beginner should grasp:
Appreciation: Appreciation is the increase in the value of a property over time. It’s one of the primary ways real estate investors make money, especially in growing markets. Appreciation can result from factors like inflation, increased demand, or improvements made to the property.
Capitalization rate (cap rate): Think of the cap rate as a tool to gauge the potential return on a property. It’s a percentage derived from comparing a property’s net operating income to its current market price.
Cash flow: This term captures the money dance – what’s coming in and what’s going out. In the context of rental properties, it means the rental earnings minus all the costs. Positive cash flow indicates you’re earning more than you’re spending.
Equity: Equity represents the value of ownership in a property. It’s calculated by taking the market value of the property and subtracting any outstanding mortgage or loans against it. As an investor pays down their mortgage or if the property appreciates in value, their equity in the property increases. This equity can be tapped into for various financial needs or reinvested.
Leverage: This term refers to the concept of using borrowed money, often in the form of a mortgage, to invest in real estate. It allows investors to purchase properties with a small down payment and finance the remainder. When used correctly, leverage can amplify returns, but it can also increase the risk if property values decline.
Net operating income (NOI): Simplified, NOI is the profit made from a property after deducting all operational costs. It’s your rental income minus all the expenses, showing the true earning potential of a property.
Real estate owned (REO): An REO property is one that didn’t sell at a foreclosure auction and is now owned by the bank. These properties are often sold at a lower price because banks aim to sell them quickly, making them attractive to investors.
Return on investment (ROI): In simple terms, ROI measures the bang you get for your buck. It’s calculated by comparing the profit you made to the amount you invested. The higher the ROI, the better your investment performed.
Conclusion
Real estate investing offers an avenue to diversify your portfolio, generate steady income, and potentially achieve long-term growth. With due diligence, a clear strategy, and the right team, beginners can successfully navigate the complexities of the real estate industry and lay the foundation for a prosperous investment journey. Remember, every millionaire real estate investor started with their first property. Your journey is just beginning.
Rent abatement is a powerful tool that can benefit both landlords and tenants, providing a financial cushion in times of hardship or unexpected events. By understanding the ins and outs of rent abatement, you can ensure a mutually beneficial agreement and avoid potential legal disputes. In this blog post, we will delve into the different types of rent abatement, negotiation strategies, common scenarios, insurance options, and legal aspects to help you navigate this crucial aspect of the landlord-tenant relationship.
Key Takeaways
Rent abatement is an agreement between landlords and tenants which can provide mutual protection while potentially increasing tenant attraction.
Negotiating rent abatement requires understanding one’s rights, being prepared for counteroffers, considering the entire agreement and relevant market conditions.
Successful implementation of rent abatement requires open communication and a thorough review of lease terms to ensure mutual protection.
What is Rent Abatement?
Rent abatement, including partial rent abatement, is a temporary reduction or suspension of rent payments in specific situations, such as property damage or natural disasters, benefiting both landlords and tenants. It is a powerful financial tool that can help protect both parties from unforeseen circumstances, especially in commercial real estate where businesses can be significantly impacted by property damage or other issues.
A smooth and successful relationship between landlords and tenants is facilitated by incorporating rent abatement terms in the lease agreement. These terms can provide substantial protection and lead to increased tenant attraction and revenue for landlords, while tenants may enjoy a partial discount on the overall rental period.
Commercial Lease Rent Abatement
In commercial leases, rent abatement can be negotiated during tenant improvements, as a concession, or due to the space being untenantable. Rent abatement is often viewed by landlords as a necessary compromise, given it is a more attractive option than having an empty office space during the abatement period.
Typically, rent abatement is applied in commercial leases when the tenant’s space is undergoing construction or to cover the tenant’s business opening. This can result in a rent reduction for the tenant during the specified period, helping businesses minimize their financial burdens during times of transition or renovation.
Residential Lease Rent Abatement
Residential rent abatement typically applies when a property becomes uninhabitable due to damage or necessary repairs. This form of rent relief helps protect tenants from financial hardships when they are unable to fully utilize their living space. During this period, the tenant may be eligible for abated rent, depending on the terms of the lease agreement.
Both landlords and tenants have specific rights and responsibilities regarding rent abatement in residential leases. Landlords must ensure that the rental property is safe and habitable, while tenants must adhere to the lease agreement and make timely rent payments.
For a successful rent abatement implementation, open communication, thorough review of lease terms, and preparedness to negotiate are key strategies landlords and tenants should adopt.
Negotiating Rent Abatement in Lease Agreements
Successfully negotiate rent abatement in lease agreements by understanding your rights and responsibilities as a landlord or tenant and being prepared for counteroffers from the other party. This process can be complex and requires careful consideration of the entire agreement, as well as an understanding of the relevant market conditions.
Landlords may offer alternative options such as longer lease terms, higher lease rates, and higher yearly rent escalations in lieu of rent abatement. To navigate these negotiations effectively, it is advisable to save the abatement request for a later stage, after addressing the primary requests and concessions. Flexibility and openness to compromise can lead both parties to an agreement that offers mutual benefits.
Know Your Rights and Responsibilities
When negotiating rent abatement, landlords and tenants should be aware of their rights and responsibilities. For landlords, this involves:
Evaluating the tenant’s request and determining the legitimacy of the stated reasons
Communicating with the tenant
Negotiating the terms of the rent abatement agreement
Tenants, on the other hand, have the right to request rent abatement if they are experiencing issues with their rental unit that may affect their ability to pay rent. They also have the responsibility to communicate with the landlord, provide necessary documentation or evidence, and negotiate the terms of the rent abatement agreement.
A comprehensive understanding of these rights and responsibilities can enable both parties to collaboratively reach a fair agreement.
Be Prepared for Counteroffers
When negotiating rent abatement, tenants should expect counteroffers from landlords, such as longer lease terms or higher rent. These counteroffers may be offered as alternatives to rent abatement, so it’s important for tenants to be ready to negotiate and be amenable to compromise.
To effectively negotiate counteroffers, tenants should engage in transparent dialogue with their landlord, thoroughly analyze the lease terms, and be willing to meet halfway. Preparation for counteroffers and a clear understanding of their rights and obligations under the lease agreement can empower tenants to successfully navigate rent abatement negotiations and reach an outcome that benefits both parties.
Rent Abatement Scenarios
Rent abatement scenarios include property damage and repairs, as well as natural disasters and evacuations that render the property unusable. In these situations, rent abatement provisions in lease agreements can provide financial relief for tenants and help landlords avoid potential legal disputes.
Whether the property is commercial or residential, understanding the various rent abatement scenarios and the implications for both landlords and tenants is crucial for a successful landlord-tenant relationship. By being aware of these scenarios, both parties can work together to address the issues and find a fair solution that meets everyone’s needs.
Property Damage and Repairs
Rent abatement may apply when a property is damaged and requires repairs, making it temporarily uninhabitable. In such cases, the landlord is obligated to cover the costs of repair, and their business liability insurance typically provides the necessary coverage.
During the rent abatement period, rent abatement can provide tenants with financial relief, allowing them to stop paying rent for an unusable space and focus on finding temporary housing or alternative arrangements without the burden of paying rent.
It’s important for both landlords and tenants to understand the terms of their lease agreement regarding property damage and repairs to ensure a smooth rent abatement process.
Natural Disasters and Evacuations
Natural disasters and government-mandated evacuations can also trigger rent abatement provisions in lease agreements. In these situations, the property may be rendered unusable, and tenants may require financial assistance to cope with the unexpected event.
By incorporating rent abatement clauses in lease agreements, both landlords and tenants can be prepared for such scenarios and ensure that their rights and responsibilities are clearly outlined. Understanding the role of rent abatement in natural disasters and evacuations can help both parties navigate these challenging situations and reach a fair resolution.
Insurance Options for Landlords and Tenants
Insurance options for landlords and tenants include renter’s insurance, business liability insurance, and business interruption insurance to cover various risks and expenses. These insurance options provide financial protection for both parties in situations where rent abatement may be applicable, as well as in other unforeseen events.
A clear understanding of the available insurance options and their respective coverages enables landlords and tenants to make informed decisions on the best policies to suit their needs and mitigate potential risks. This ensures that both parties are adequately protected and prepared for any challenges that may arise during the rental period.
Renter’s Insurance
Renter’s insurance covers personal belongings and temporary housing in case of property damage or rent abatement ineligibility. This type of insurance is essential for residential tenants, as it provides financial protection against theft, fire, natural disasters, and other unexpected events that may affect their personal property.
Obtaining renter’s insurance is a recommendation applicable to all tenants, irrespective of their rental situation. This way, they can safeguard their personal belongings and enjoy peace of mind knowing they are covered in the event of unexpected occurrences.
Business Liability Insurance
Business liability insurance protects commercial tenants from property damage and loss of personal property caused by the rented space. This type of insurance is crucial for commercial tenants, as it provides coverage for losses incurred due to property damage and helps them avoid potential financial hardships.
Commercial tenants should carefully consider the extent of their business liability insurance coverage for their commercial property, as well as any additional coverage options that may be necessary for their specific situation. By doing so, they can ensure that their business is adequately protected against potential risks and unexpected events.
Business Interruption Insurance
Business interruption insurance covers lost income and operating expenses due to property damage or destruction. This type of insurance is particularly important for commercial tenants, as it provides financial assistance to businesses that experience a loss of income due to a covered peril, such as a natural disaster or property damage.
When obtaining business interruption insurance, tenants should ensure that they have set appropriate policy limits and understand the coverage provided by the policy. This will help them to be prepared for any unexpected events that may impact their business operations and minimize potential financial losses.
Legal Aspects of Rent Abatement
Legal aspects of rent abatement include incorporating rent abatement clauses in lease agreements and taking a rent abatement case to court if necessary. Understanding the legal implications of rent abatement is crucial for both landlords and tenants, as it ensures that their rights and responsibilities are clearly outlined and that any disputes can be resolved fairly and efficiently.
Awareness of the legal aspects of rent abatement enables landlords and tenants to collaboratively address potential issues and find a resolution benefiting both parties. This helps to maintain a positive landlord-tenant relationship and minimize the risk of legal disputes.
Rent Abatement Clauses in Lease Agreements
Rent abatement clauses in lease agreements outline the terms and conditions under which rent abatement can be applied. These clauses are essential for ensuring that both landlords and tenants understand their rights and responsibilities in case of property damage, natural disasters, or other scenarios that may trigger rent abatement.
Incorporating clear and comprehensive rent abatement clauses in lease agreements helps both parties sidestep misunderstandings and potential disputes. This helps to maintain a positive landlord-tenant relationship and ensures that both parties are protected in case of unexpected events.
Taking a Rent Abatement Case to Court
Tenants can take a rent abatement case to court if the landlord fails to meet lease terms or provide a habitable property. In such cases, tenants may be required to request an inspection by city officials and, if the landlord still does not comply with the required repairs, the tenant can bring the case to court.
Understanding the process of taking a rent abatement case to court is crucial for tenants who may need to pursue legal action against their landlord. Preparation and knowledge about the legal aspects of rent abatement empower tenants to protect their rights and ensure they receive the appropriate financial relief.
Tips for Successfully Implementing Rent Abatement
Successfully implementing rent abatement requires open communication between landlords and tenants, as well as a thorough review of lease terms. By maintaining a positive dialogue and understanding the legal implications of rent abatement, both parties can work together to reach a fair and mutually beneficial agreement.
Maintaining a successful rental relationship and ensuring protection of respective rights and responsibilities can be achieved by landlords and tenants through proactive addressing of potential rent abatement scenarios and adherence to these tips.
Communicate Openly and Honestly
Maintaining open and honest communication between landlords and tenants is essential for ensuring a smooth rent abatement process. By being transparent in their communication and receptive to each other’s perspectives, both parties can work together to address any issues that may arise and find a fair solution.
Maintaining open communication can be achieved through strategies such as proactive discussions about potential rent abatement scenarios, clear and timely updates on property repairs, and a willingness to compromise and negotiate. Through effective communication, both landlords and tenants can build trust and ensure a successful rental relationship.
Review Lease Terms Carefully
Both parties should review lease terms carefully to understand their rights and responsibilities regarding rent abatement. By being aware of the specific clauses and provisions related to rent abatement in their lease agreement, landlords and tenants can avoid potential misunderstandings and disputes.
Review of lease terms by both parties should take into account clauses related to rent abatement. These clauses may include stipulations for:
Rent reductions or waivers in the case of property damage
Rent reductions or waivers in the case of natural disasters
Rent reductions or waivers in the case of other scenarios
By understanding these terms and ensuring that they are clearly outlined in the lease agreement, both landlords and tenants can work together to address potential rent abatement issues and find a mutually beneficial solution.
Summary
In conclusion, rent abatement is a powerful financial tool that can benefit both landlords and tenants in times of hardship or unexpected events. By understanding the different types of rent abatement, negotiation strategies, common scenarios, insurance options, and legal aspects, landlords and tenants can navigate this crucial aspect of their relationship and ensure a successful rental experience. Remember, communication is key, and a thorough understanding of your lease terms is essential to protect your rights and responsibilities.
Frequently Asked Questions
What is the rent abatement in NJ?
In New Jersey, a rent abatement is a court order resulting from a finding that the property was not maintained in a habitable condition. It allows the tenant to be charged only with the reasonable rental value of the property in its imperfect condition during the tenancy.
How do I request rent abatement in NYC?
To request rent abatement in NYC, you can submit an individual complaint by using the DHCR Form RA-81 or submitting a complaint online at www.hcr.ny.gov.
How do you use rent abatement in a sentence?
Tenant acknowledges and agrees to a rent abatement granted as additional consideration for entering into an amendment and paying rent under the lease.
What is the main purpose of rent abatement?
Rent abatement is a beneficial measure which allows landlords and tenants to temporarily reduce or suspend rent payments in specific situations, such as property damage or natural disasters.
How is rent abatement negotiated in lease agreements?
Rent abatement can be successfully negotiated in lease agreements by being knowledgeable about your rights and responsibilities and being prepared for counteroffers.
This article is intended for informational purposes only and should not be considered legal advice. Always consult a qualified attorney in regards to any legal matters.
Searching for a new apartment often takes a lot of time and research; in fact, it can be disheartening if you have a hard time finding an apartment you love. And that’s why winter is the best time to rent an apartment. You might be surprised at how easy it is to discover your next apartment, one that you can’t wait to turn into a home.
1. There often is lower demand in the winter
It’s no secret people love to move in the summer. The weather usually is great, the kids are out of school for families looking to relocate and there often is less demand on our time for other activities. In fact, 40 percent of all moves occur in the summer, with just 5% taking place in November and December. As a result, apartment shoppers can find some great apartments for rent, particularly new apartments that may be completed during the season.
2. You could find more options for apartment size, style
In tandem with lower demand, renters may find there is a wider variety of apartment sizes and styles available during the winter than in other seasons. Because demand is lower, it might be easier to find that two-bedroom apartment you wanted instead of having to settle for a one-bedroom unit. This also applies to those new apartments that are completed during the winter. That means you could land a great apartment with new appliances, updated finishes and special spaces such as a sunroom or screened porch.
3. There could be more availability with movers
Because people don’t move as often during the winter, you may be able to book your movers on your timetable instead of having to wait for one to become available. This is important so you can schedule the movers around your commitments and work schedule and don’t have to use valuable personal or vacation days for moving instead. Also, during this slower season, movers may not be as rushed, so might be less likely to damage your items.
4. You could have more time off to move
No one wants to spend their personal or vacation days moving instead of on a much-needed vacation. When moving in the winter, particularly around the holidays, you likely could have extra days off that won’t interfere with your PTO or vacation days. Although no one wants to spend their holidays moving, it could prove beneficial if you don’t have to take off extra time at work.
5. You could snag an apartment when a fall graduate vacates
Looking for an apartment near a college campus could be especially challenging because many, if not most, apartments are already booked from September through May. However, if you are moving to a college town during the winter, particularly in December or January, you could score an apartment when a fall graduate prepares to move out. After all, no landlord wants an apartment to sit empty until the new students arrive in August or September.
6. You could save money
While you may not be looking for a less expensive apartment, you could still score one during the winter. No landlord wants a vacant apartment, so it’s not uncommon for them to run rent specials during the winter when demand is low. This could range from waiving the security deposit to offering a free month of rent to reducing rent for the entire term of the rental agreement.
7. It’s a good time to negotiate preferred rental terms
Because landlords want to rent empty apartments during the winter, the tenant is in a good position to negotiate the rental agreement terms. This could include asking for a shorter- or longer-term lease, waiving fees such as those for pets or upgrading the appliances in the unit. If there’s something you want, now is the time to ask. The worst that could happen is the landlord says no.
Yes, winter is the best time to rent an apartment
As you can see, renting an apartment during the winter could provide many benefits, so don’t hesitate to start looking for a new apartment when the weather turns cold. You could end up scoring a hot deal on your next home.
Alicia Underlee Nelson is a freelance writer and photographer. Her work has appeared in Thomson Reuters, Food Network, USA Today, Delta Sky Magazine, AAA Living, Midwest Living, Beer Advocate, trivago Magazine, Matador Network, craftbeer.com and numerous other publications. She’s the author of North Dakota Beer: A Heady History, co-host of the Travel Tomorrow podcast and leads travel and creativity workshops across the Midwest.
I bought two laundromats over the last year and I have learned so much after diving into the business headfirst. I am not an expert on laundromats but I have learned enough to point out some of the pros and cons for someone thinking about geting into the business. I bought one of the laundromats with the real estate and the other I am leasing. There are pros and cons to both of those structures as well. I love the business and people can make a lot of money but it is not as easy as it may appear.
Why did I want to get into the laundromat business?
My main career is real estate. I own commercial, multifamily, and single-family rentals. I flip houses and I also own a real estate brokerage and have an online presence with this blog and social media. I have a successful YouTube channel and love doing different things. I have always wanted a brick-and-mortar business to go along with my real estate and online businesses. In 2022 I bought a building that came with a liquor store and a mini-mart. That has been a fantastic experience and I loved every inch of it. I also bought a bar in 2022 which was a horrible experience I never want to experience again!
Being in the online real estate niche I have met many interesting investors and business people including Brandon from Investment Joy who owns laundromats. I loved watching him collect quarters and it appeared his laundromats had done very well. I decided that would be a business I wanted to get into at some point even before I bought the liquor store. I even tried to turn one of the bars I bought into a laundromat without any success. Then I ended up buying an 8 plex with coin-op laundry and I realized how much I love collecting quarters.
I knew I wanted a laundromat but I was not sure how to get one because starting a laundromat is so difficult and I had never seen one for sale in my area before.
How to get started investing in real estate
Why did my first attempts at starting a laundromat fail?
Since I could not find any laundromats for sale I tried to start one from scratch. I had bought a building in a small town that used to be a bar but the bar shut down during covid. I was thinking of opening it back up as a bar again but that did not go as planned. There were no laundromats in this town or any of the other towns within 10 miles so I thought the area would work well.
I will be the first to tell you I was naive and in way over my head. I did not realize how hard it would be to start a laundromat from scratch. Here are some of the issues I ran into.
The city wanted me to bring 2 shares of water to get a laundromat approved in my building. I am in Northern Colorado and that would have cost me $70k for each share if I could find them.
To buy all new equipment (for a fairly small building) was going to cost me more than $200,000. Commercial washers and dryers are expensive and most companies offer financing for that reason.
Not only did I need new equipment but I needed to upgrade the electrical, gas, and plumbing. Many of the big washers require 3-phase electricity.
To run big machines you usually need a concrete slab to handle the weight and torque they produce. My building had wood floors with a crawl space.
After looking at the numbers, I knew there was no way this laundromat was ever going to make money if I financed all of the equipment and repairs. It was going to cost me close to $500k to start this laundromat in a building I already owned and it was not going to be very big. I thought I was being clever starting a laundromat and could not figure out why no one else had done it yet. I realized there was a reason very few people start new laundromats!
How did I find a laundromat for sale?
I put my dreams on hold for a while but as I was still very active in the real estate world. I post videos of all of my deals on my YouTube channel including my effort to start a laundromat that did not work.
Because of my videos, someone reached on on YouTube and said their family might have a laundromat for sale soon. This was a very small laundromat with a very small car wash in a small town but it was better than nothing. I talked to the person who said it might be for sale but we could not get a deal done. They wanted to trade a house for the property and I did not have anything they wanted.
Then about 6 months later, they reached back out and said they really wanted to sell now. It took months but eventually, we made a deal I was able to buy an existing building with a laundromat, a small apartment, a 2-bay car wash, and a 600 sqft shop. I paid $310,000 for everything which is not bad considering I am in Colorado where real estate is very expensive.
This laundromat had only top-loading washers and very old dryers but it has taught me a ton about the business. I am working on getting better machines for it now which is not easy to do!
What have I learned from my first laundromat?
There were many things I did not know about owning a laundromat before I bought it. I tend to jump into things before I know everything which can be good and bad. The previous owners gave me almost no information on the utilities, income, or the property at all. However, I knew the apartment, shop, and space where the laundromat was were worth what I paid even if the laundromat was not there.
Here are some key points I have learned so far. I will be totally honest and admit the business is not making money yet but I think it will eventually.
Finding big machines is very hard! I thought it would be easy to find some of the bigger machines the other YouTube laundromat guys mention are their big money makers and it is not. The big companies with new or used machines will not even return my calls or emails because I am so small. I have found some bigger machines but I had to search far and wide for used machines from individuals in my state.
Finding people to work on the machines is hard! I have called every appliance person I know in the area and most of them don’t work on appliances anymore and those that do won’t work on laundromats. I have found some people but they are pretty far away, charge me trip fees, and take their time. I found that most laundromat owners work on the machines themselves.
The big machines are not a simple installation. I have a couple of larger machines but they need a concrete pad, 3 phase-electric, and someone who knows what they are doing. I am not sure my small laundromat will ever be able to use the big machines because it also has a wood floor with a crawl space.
Finding parts to repair machines is hard! After finding some people who can work on the machines I ordered parts or tried to order parts for some of the broken machines I have. I actually took over a second laundromat with bigger machines and some of the parts needed are not being manufactured and are out of stock everywhere.
Used machines are so much cheaper than new ones. While it is hard to find used equipment it does come up for sale occasionally. Some companies and people will tell you, you must have all new but I have found others who swear by used equipment. Instead of spending $200k you could spend $40k for the same machines but realize you may need to repair the older machines more often.
Conclusion
It took me a long time to find a laundromat, to learn the ins and outs, and to network with people in the industry. However, it has been a ton of fun and I have just scratched the surface of the industry. I plan to improve my laundromats and document everything I learn along the way. I took over the lease on a newer bigger laundromat this summer as well and I can’t wait to see how it does when we open. I found that laundromat through networking and people knowing I was looking for machines from my YouTube videos.