Is investing in a Rental Property a Good Investment?

It sure can be!!! I decided to investigate this more and share what I’ve learned. Managing rental properties is a time-consuming business activity. Finding and screening tenants, dealing with repairs and maintenance issues, and the other aspects of managing properties can take a lot of time, especially if you have several properties. Many things to consider so that things run smoothly. If a rental property isn’t managed correctly, it really can become a nightmare for you and for the tenants.

The Decision…Will you be a hands-on landlord, or will you outsource some things or everything?

So, hands-on what does that entail??? You will need to advertise for tenants and do tenant screening to see if they are credit-worthy, financially stable, and see past references to see if they are a good fit.  Once you have found your new tenant, before the new tenant(s) move in, consider your to-do list of things like cleaning the rental property, does it need painting or any fixing up? Is the plumbing working? How about the appliances? Do you have reliable vendors to call upon and how costly are they?

Be prepared to go over Your house rules and regulations with the new tenants as well as the community and/or buildings rules and regs.

Then collecting security deposits, should be a no-brainer.

And there’s the lease agreements and rent collection (will your tenant pay for utilities?) how about insurance, how much you will pay to insure your property, and will you require the tenant to have renter’s insurance?

How far is your rental property from your home? Your time is valuable -- if you live 30 minutes away from your rental property, that’s an hour out of your day plus whatever time you spend at the property every time you must go there. Plus, being far away from a rental property makes it difficult to deal with urgent issues on your own.

Consider when deciding if you should handle this yourself or not.  As a rental property owner, you are a business owner, when you do it all yourself you know what is going on in all parts of your business. You’ll be aware of problems quickly having your hand in all parts of management because you oversee everything. That’s a plus! Keep in mind, it is impossible to be an expert at everything. It can become overwhelming being all things to all people and taking responsibility for everything you may make errors.

Using a Property Management Company, Pros to consider: 

Freedom From Daily Headaches: You will not have to field the phone calls at two in the morning that the next-door neighbor is playing their music too loudly. You will be responsible for the bare minimum, but the decisions you are responsible for will typically be the most important decisions, such as giving the OK to begin a tenant eviction.

Using a Property Management Company, Cons to consider: Costly: 

As Warren Buffett once said, "Price is what you pay, value is what you get." Many landlords get tremendous value from their property managers, so it’s important to consider what you get before you choose to self-manage. They should cover all the bases including marketing, tenant screening, rent collection, tenant disputes, accounting, maintenance, late-night phone calls, legal compliance, and more -Some management services will take care of just the tasks that you desire like tenant location and placement.

• 10% of collected rent seems to be the industry standard for long-term rental properties, and most property managers charge between 8% and 12%. Some also take a bigger cut of the tenant’s first month rent to help offset the time and expense of putting a tenant in place, while others don’t. For example, a property manager may charge half of the first month’s rent plus 10% of the rent on an ongoing basis. You may also be able to get a better deal if you have several rental properties or multi-unit properties.
• If your property is rented on a short-term basis (such as a vacation rental) it’s important to expect property management fees to be significantly higher (think 25%-40% of collected rent). This may sound astronomically high but consider the extra work that goes into managing a short-term rental. For example, if you rent a beach condo on a weekly basis, your property manager needs to get as many as 52 different "tenants" per year, while a manager of a long-term rental home likely needs to find just one new tenant a year, if at all.
• Mismanagement Can Destroy Your Business: You are putting your business and your livelihood, in someone else’s hands. It will be very hard to find someone who cares about your success and failure as much as you do. Make sure you thoroughly screen any property management companies and ask for referrals.
• Find out what your clear exit strategy is in case things go bad.

Investing in rental property is time-consuming and can be extremely stressful, but it also has the potential to be rewarding and profitable.

Call me today to start looking at potential investment properties.