Investing in rental property demands long term, strategic planning
If for every time I met/spoke with someone who envied our work in real estate because they imagined that it was all glam and fine, and I was paid 500k every such time – I SHOULD BE A BILLIONAIRE BY NOW!!
Despite what anyone tells you, just like any other business – there are good days, bad days and terrible days to behold you once you step into the world of being a real estate broker, investor or property owner.
There is no doubt that investing in rental property is a great line of business to get into in order to make copious piles of money, BUT there are a few things to consider before jumping into the fray. This is particularly true if you are considering going the route of a rental property owner.
Last week I wrote about “What to do when vacating a rental property” and if you read that piece you will also understand why and that this piece is essentially a flip side to it.
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So, this week, I am going to splurge on the “Woes of rental property ownership”.
There are all kinds of reasons that investing in rental property is a good solid investment for most that are interested in investing in the real estate business however, it doesn’t come without a few drawbacks, not all of which are financial.
It would be wise to consider these things however before you buy your first rental property (or your next one)
1. KISS GOODBYE TO YOUR PERSONAL LIFE: If you own rental properties and elect to manage them yourself, which is probably wise (unless your first property is multiple rental units), you will quickly discover that your life is no longer your own. You are literally on call 24 hours a day, 7 days a week to handle problems that may arise from pipes bursting, heating going out, electric issues, noxious fumes, leaky roofs and windowsills and countless other complaints that may erupt at odd hours of the day or night. Your tenants will have your phone number and expect you to always take their calls.
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2. EMBRACE YOUR OTHER/ALTER EGO PERSONALITY: You may have to play the role of Mr. or Mrs and become mean every month when the rent is due. This is the most frequently given reason why rental property owners give their properties out to a management agency – they do not want to be ‘the bad guy”.
Understanding how this can probably be the least tasteful task of owning rental properties – it is where your bread and butter comes from.
You will hear all manner of sob stories in your role as a landlord but you need to treat this like the business that it is and brace up for even the things about your business you don’t like such as rent collecting and, when necessary, eviction proceedings.
3. LEARN ABOUT THE BASICS OF MAINTENANCE AND HIRE A TEAM: In almost all the projections I have seen from potential property owners – the budget for maintenance is always just about a quarter of what it should be.
Depending on how often your unit is used (which we hope is more than average), there is surely going to be a constant need for upkeep and repair which is often daunting to rental property owners.
It is a sad truth that people/tenants do not treat rental properties with the respect that they would treat a home of their own. For this reason, you usually need to paint and replace things, at the very least in between tenants. This takes work and time not to mention the fact that the time that is spent painting and replacing the flooring is time that the property is going to be empty of tenants and not bringing in any income.
4. YOUR TENANT MARKETING NEEDS A WINNING STRATEGY: Investing in rental property makes good returns when it is used. If not occupied by a tenant, it does not make money, which is the reason you need a consistent stream of leads looking to rent your property.
You want to have the property filled as often as possible and you really want long-term tenants whenever you can manage that. One way of course is by making sure that your tenants are treated well, not overcharged, and happy with their homes.
Investing in rental property can be financially rewarding but it is a lot more work than many people give credit.
Rental properties require a long-term commitment to keeping the property in good shape and making it a profitable venture for years. If you are considering this business and the above things are a deterrent to you, it might be a good idea to obtain the services of an investment property manager – of which I am ONE.
Should you have any questions about rental property ownership, drop them in the comments below or email me here.
Until next time, I remain your cheerleader for creating wealth through real estate.