Rental Properties are a future investment as well as a money maker. Making sure you have the right property to suit your individual needs is critical. You want to be 100% satisfied with your rental property when all things are said and done. You want to avoid being stuck with a property that you can't rent or has no investment future. In the following info I'll share 3 common mistakes made by first time landlords.
1. OVER PAYING FOR PROPERTY - The price alone is not your only concern, you need to research the area as well and ask the pertinent questions involved in your final decision. SALE PRICE of the houses around your prospective property (higher/lower). Is there a over abundance of houses for sale in area? Why? Is it a high crime area? (Check with local police or local library for crime stats). What are the schools in area like (reputation). You may have tenants with small children or planning a family. What is the job market like in the area? Is it a rising job market or declining, this will determine your turn over rate. Another turnover rate to be aware of is if there is a college or university in the area. Do you want a student rental? There are MORE questions to ask, these are just a few.
2. BEING UNDERCAPITALIZED -By this I mean going into your investment being financially unprepared. If you go into this with a no money down or minimum down payment, make sure you have capital in reserve. What happens if you can't find a suitable tenant immediately and your mortgage payment is due? Do you have the income to cover payments? Unexpected maintenance bills before your rental property can be rented. Unforeseen repairs in the first few months and as new tenants request repairs. Ignoring small repairs can lead to major repairs and expenses, but this is another topic for another time.
3. In relation to the above topic, not understanding FINANCIAL MANAGEMENT is another common problem area to avoid. Once the rental income starts to roll in it is easy to forget you have financial responsibilities. Being prepared is one of the first things to be forgotten once you have extra cash in hand. You must keep in mind this is a business as well as an investment. Besides the obvious maintenance bills and general up keep its the unobvious that will catch you off guard, now or in the distant future. One example is Court costs that people tend to forget. Small claims to recover unpaid rent (it will happen). You may recover these costs, but the initial costs will be out of pocket. Plus law suits must be fought diligently. It's prudent to be prepared. Also taxes, utilities (your choice), advertising for rental etc. Just some of the surprises that could be forgotten.
These 3 common mistakes only touch on the many issues you have to consider before purchasing that first rental property. Success is very attainable in the rental income market and the return on your dollar can be excellent, especially if you are prepared for any surprises or setbacks.
1. OVER PAYING FOR PROPERTY - The price alone is not your only concern, you need to research the area as well and ask the pertinent questions involved in your final decision. SALE PRICE of the houses around your prospective property (higher/lower). Is there a over abundance of houses for sale in area? Why? Is it a high crime area? (Check with local police or local library for crime stats). What are the schools in area like (reputation). You may have tenants with small children or planning a family. What is the job market like in the area? Is it a rising job market or declining, this will determine your turn over rate. Another turnover rate to be aware of is if there is a college or university in the area. Do you want a student rental? There are MORE questions to ask, these are just a few.
2. BEING UNDERCAPITALIZED -By this I mean going into your investment being financially unprepared. If you go into this with a no money down or minimum down payment, make sure you have capital in reserve. What happens if you can't find a suitable tenant immediately and your mortgage payment is due? Do you have the income to cover payments? Unexpected maintenance bills before your rental property can be rented. Unforeseen repairs in the first few months and as new tenants request repairs. Ignoring small repairs can lead to major repairs and expenses, but this is another topic for another time.
3. In relation to the above topic, not understanding FINANCIAL MANAGEMENT is another common problem area to avoid. Once the rental income starts to roll in it is easy to forget you have financial responsibilities. Being prepared is one of the first things to be forgotten once you have extra cash in hand. You must keep in mind this is a business as well as an investment. Besides the obvious maintenance bills and general up keep its the unobvious that will catch you off guard, now or in the distant future. One example is Court costs that people tend to forget. Small claims to recover unpaid rent (it will happen). You may recover these costs, but the initial costs will be out of pocket. Plus law suits must be fought diligently. It's prudent to be prepared. Also taxes, utilities (your choice), advertising for rental etc. Just some of the surprises that could be forgotten.
These 3 common mistakes only touch on the many issues you have to consider before purchasing that first rental property. Success is very attainable in the rental income market and the return on your dollar can be excellent, especially if you are prepared for any surprises or setbacks.
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