Rental house should be purchased for long term

Q: When should I purchase a house to rent and hold as an investment, and how long should I hold it until I sell it? -- Dale H., Las Vegas

A: You ask two great questions. I will share my thoughts as an investor, and I hope they work for you as well.

First, would I buy in today's market? The answer is yes. In fact, despite what you may hear in the media, there are more opportunities out there right now than ever before. I think this is especially true here in Southern Nevada, where our economy is fundamentally strong and some new studies suggest we could actually see another housing shortage here in a few years.

For now at least, new home tracts are offering some fantastic incentives, whether assisting with closing costs or throwing in appliances or other offers. These are definitely attractive options.

And with about 23,000 resale homes on the local market, the chances of finding exactly what you are looking for has never been better. Certainly, with the number of foreclosures that have occurred, picking up a bank-owned property can also be a good deal.

However, in each of these cases, you must do your homework. Your Realtor can guide you through each of these purchases, depending on which fits best for you.

From there, meet with your lender to discuss the loan programs available to you, and make sure you qualify. The types of programs and interest rates vary, so make sure you understand each of them.

Next, get your Realtor to help you find and see the best available properties. They will run a comparable market analysis, not just on the purchase price, but also on the rental rates in the neighborhood. Keep in mind that there may be additional expenses, such as a fee for a home within a special improvement district.

Third, I highly suggest working with a property management company. They can provide you with more information on your expenses versus your expected income.

In some cases, you may want to provide lawn care, pool care, or even cover the sewer fees and bill the tenant back for these expenses. In any case, a property manager can give you the input you need to make these decisions.

By this point, you should have all the information necessary to make a sound decision. Certainly, you will want to make sure that in any months where your property is without a tenant that you will be financially capable of making the mortgage payments on the property.

As far as how long you should hold your property, I would hold it as long as you possibly can. Looking at property values over time, you are more likely to see the value increase the longer you hold it.

In general, I like properties that have the greatest potential to go up in value. I prefer to have a mortgage on a property that allows me to make some money each month, but I can also live with a property that shows a slight negative return over a period of time.

In my case, I am looking at the long-term potential for such properties.

I hope this gives you some good ideas. Happy investing.

Devin Reiss is the president of the Greater Las Vegas Association of REALTORS? (GLVAR) and has worked in the real estate market for more than a decade. GLVAR has nearly 16,000 members. To ask Reiss a question, e-mail him at ask@glvar.org. For more information, visit lasvegasrealtor.com.