Real estate is another way to build your wealth besides investing in stocks. Some people may not agree with me but this is just my opinion. I too have a mutual funds but real estate is another way to invest. If you know our city and it’s real estate market, you will know that rentals are hot. Houses that are put on the market for lease (those with the market rate) will be leased in a matter of days. We have listed a house on Thursday and got as many as 3 applications next day. I am not kidding.
We have clients who don’t believe us until they themselves put in an application only to find out the landlord have a few applicant to choose from.
If you are a landlord, you might be laughing your way to the bank to deposit your rental deposits and collecting your monthly rent check. Besides collecting the checks, landlord too have expenses. As a real estate professional and landlord myself, I always recommend the following to our client who wants to put their home up for rent:
- Remove the emotional out of the house. You are about to turn your current home into a business. There should be no emotional tie to the property. IT’S NOT PERSONAL, IT’S ALL ABOUT BUSINESS!
- Make sure you set a side some funds for repairs. Personally, I recommend at least 3 – 6 months. WOW! But that is a lot of money? Yes it is but this will break down and you will have to repair it. When your tenant leaves, you will need to turn the house around ready for the next tenant. Carpet, paint, clean up and not to mention it might take a month to get things turnaround and you won’t have any income then.
- Insurance. DUH! Need I say much? Yes, not just your rental home insurance but also liability insurance as well.
- List your house with a professional. They can help to run background checks to make sure your tenant is who they say they are and can pay the rent.
- Use a professional to manage your property. Not your uncle Fred who lives in town and is a handyman. I am taking about a professional company who does this for a living. There will be a cost to it but you will appreciate it when you need to evict your tenants because they cannot pay up, or you not getting the call about the plumbing not working. They do this for a living and knows the ins and outs of the business. You don’t do this for a living. You need someone who knows what they are doing especially if you live in another state or a different time zone.
- Lastly, don’t spend the rent if you are cash flowing. Instead, put the cash flow part towards the mortgage. This will help to pay off the property faster. If you pay off the property, you get 100% of the rent minus whatever property management company charges. Then you can live on that.
Real estate is a great way to hedge inflation. I am not a financial expert but I do know when they stock market crash, the property still stands and is still worth something. If you do this correctly, you will see the fruit of your financial labor.
If you have any questions about being a landlord, call us. We are here to help.