A purchase of a vacation home, income or rental property can be an exciting addition to your assets. Before you make the decision to take this step, it is highly recommended that you gather information and documents to assist your CPA and other trusted advisers in helping you determine if this is a wise decision.
Estimated costs for purchase
Items that you want to consider in evaluating income or rental property to purchase include:
1) Loan amount and terms (fixed or adjustable, loan length, monthly payment amount, points) – It is suggested that you speak with your loan broker to get more information about these details.
2) The amount of the deposit and down payment
3) Closing costs (appraisal, inspections, title insurance etc.) – The Escrow Agent can provide you with an estimate of the costs.
4) The price of any improvement work you need/want to do
If you plan to rent the property or the property is a multi-family dwelling, there are many sources of valuable data for you to assist you in your analysis including:
- purchase price
- the price of any needed improvement work
- number of units
- square footage
- furnished or unfurnished
- Existing lease(s)
- Fair market rental figures for comparable units
- Information about the property management company for the property, if any
- Annual and monthly historical rent
A full analysis of rental property includes gathering information about actual and estimated expenses. Potential expenses include:
- Utilities (water, trash, gas, electricity, cable, internet, telephone, etc.)
- Insurance (property, umbrella)
- Real property taxes (may change based upon purchase price)
- Other taxes due to city and/or county
- Maintenance and repairs
- Property management expenses
- Cleaning costs
- Permits, licenses (if required)
- Homeowners’ Association dues and assessments
When you have obtained the information above, you will have the preliminary facts to begin to assess whether this property purchase will work for you. The more reliable and accurate the information, the more helpful the analysis can be to determine whether you want to purchase this property. We can help you to identify the necessary information you need for your analysis. Contact a skilled real estate attorney to answer your questions and help guide you through the transaction.We can help you with your questions and concerns.Call us at (925) 463-9000 or send an email.
Lisa Wills of the Law Offices of Lisa D. Wills is a skilled real estate attorney in Pleasanton, San Ramon, Dublin, Livermore, Danville, Castro Valley and Hayward, CA. Please contact Lisa Wills by email at the Law Offices of Lisa D. Wills or call (925) 463-9000.