If you have rental properties, you will either love them or hate them. Why? Because they are not what the midnight cable television says them to be, easy money making assets. You might even start to question if you made the right investment decision.
If you are thinking to purchase real estate to diversify your investment portfolio, you might be doing all the research online. So, what is the secret of having successful real estate in your investment portfolio? Here are some of my thoughts and opinion from one person who has and had multiple properties.
- Remember that this is an investment. Just like any other investment, there will be a cost (real estate transaction fee, property management fees, repairs, maintenance…etc).
- You will need to remove your emotions from the property. This is not your home. This is now a business. Put on your business hat.
- Since this is a business, there are risk that is associated such as vandalism.
- Remember to put on your business hat and look at the numbers. Forget about what color the wall of the house is. The important thing is does the number works for you.
So, what should I do, you may ask.
- Treat this as a business. Don’t mix family and business IF AT ALL POSSIBLE. Don’t rent to a family member with the mentality of helping them out. It makes the relationship weird since you are, technically, their landlord. What if they don’t pay the rent on time? What if they destroyed the house?
- Get a property management company to manage your property. This is a real business. Rental property has it’s own ins and outs. Since you don’t do this for a living, you may not know what they are for instance, how do you evict your tenants?
- Make sure to buy liability insurance to cover you and your rental property. Consult with your insurance agent, hopefully they are knowledgeable.
- Make sure you have some repair/ maintenance money set aside for your rental. If you have multiple, make sure you allocate enough. If you have an older home, make sure you account for anything that might need to be replaced i.e. furnace, AC, roof, fence…etc
- Get a list of folks like painters, handyman, re-modelers. You will need them when you have a turnover.
- Don’t be cheap and try to cut corners. When there is a repair, do it right the first time. You want to preserve the quality of the house. Remember, the tenants may not report to you all the things they see. Cheap repairs may cause you more in the long run.
If you are seriously thinking about buying rental properties and don’t know where to begin, call us. We would be glad to talk to you about it to see if this is something for you or not. Rentals are not for everyone and definitely not for the faint of heart.