Questions mount when you become a property owner, and especially when you become a landlord. The purpose of owning rental property is very narrow: generate income on your investment and ultimately get more out of it than you put into it.
You will have to make a lot of decisions along the way as you seek to achieve your financial goals in owning property. Here are 5 tips to help you make the right decisions that will result in the best possible outcome for your bottom line.
Should I Lease Or Sell?
The first question to answer is whether you want to be a landlord at all, or simply an investor. You should also “take the pulse” of your target market to see if buying or renting is more likely to attract more and better potential “customers.”
And you also need to have an exit plan that will let you unload your property without taking a huge loss, as advised by Heron Home Buyers. If I’m going to buy real estate, I’m also going to find the right land contract buyer, to sell my land to ahead of time, “just in case.”
Don’t Get Too Overloaded In Debt
A certain amount of debt is unavoidable when you are dealing with real estate, but you have to manage it wisely. And your income from your property has to be greater than your mortgage payments, or you are fighting a losing battle.
When your credit card, automobile, and other small debts are wiped out, then you are in a better position to manage your “good debt” in incoming-generating properties.
Get Rental Property Insurance
Anyone who does decide to get into the rental property business needs to cover themselves against possible tenant lawsuits, burglars and vandals, and property damage from fires and weather events.
You can get specialized business property insurance from many insurers that is specifically designed to meet the needs of landlords. And the odds of needing to use such insurance are simply too high to go without it.
Treat Your Tenants Right
You need more than advertising to fill up your units and keep them full. You need a good, local reputation with potential renters. Keep your apartments in good repair, respond to reasonable maintenance requests of tenants, and take measures to increase security on your premises.
And realize that by law you must give tenants 24 hours (or more in some states) notice before inspecting their rented unit. And if you don’t keep up repairs, savvy tenants could even legally hold back rent in order to pay for fixing the problem themselves. Not treating renters right will hurt your bottom line and could even get you in trouble with the law.
Be Careful Choosing Your Tenants
It’s not enough to simply get tenants to succeed in the property management business. You have to get and retain good tenants. Thus, invest time and effort in carefully screening applicants.
Do background checks and credit checks, ask for references and verify them, write up a formal agreement and make everyone sign it before moving in, and make it clear from the beginning that you will be monitoring online for illegal subletting activities.
Unless you want to be constantly struggling to collect the rent (and on time) and always be worried about tenants destroying your property, you had better cast a wide net (advertising) but sift with a fine sieve (screening).