All you hear is non-stop chatter about how it is such a great time to buy a home and yet America is favoring renting over buying. This is mostly thanks to low buyer confidence, but the fact of the matter is that mortgage rates are at historic lows coming just under 4% on a 30 year fixed conventional loan as of February 23, 2012. Include the substantial decrease in home prices since 2006 and you’re left with a great time to buy, and yet we still have this great rental market. If you’re thinking about purchasing a rental property to diversify your investment portfolio you couldn’t find a better time and these tips are for you.
Unless you are an expereienced property manager, I would not recommend starting your real estate investment career by purchasing a 30 unit apartment complex. Start small.
Begin with a single family home or duplex. By starting with only one or two units, you can ease your way into dealing with property management challenges that will undoubtedly present themselves, rather than a trial by fire that would occur with jumping into multi-unit property.
It will be beneficial in the long run to get acclimated slowly because working with tenants is a business like no other.
Tenant Relationship Is KEY
Building a strong relationship with your tenants should be all but too obvious. Your success in working with the tenants is what will define your success in this business. The one overriding concept in which the Tenant/Landlord relationship hinges on is effective communication.
From the very start of this relationship, you will want to effectively communicate the lease information, move-in & move-out procedures, and who to call when there is an issue with the property. Make sure you have the tenants call immediately when there is an issue with the property. This will help prevent any unnecessary damage to the property. For example, we were recently walking through the most recent addition to our real estate investment portfolio. As we were walking through a unit on an upper floor, we noticed that a key plumbing component had come loose under the sink and was subsequently leaking water. The component has not been leaking long, and no noticeable damage has been caused. However, we were lucky to have caught the problem when we did because it wasn’t clear if the tenant knew what to do. We had to remind the tenant that if there was ever a question on whether he should contact us or not about the property, to just call to be on the safe side.
Any rental property you ever purchase will need maintenance. Your rental property is no different than the home you live in. It will need upkeep and repairs. The question is how will you go about performing these tasks.
If you are not lucky enough to have a trusted and talented handyman at your service, you will likely be the one tasked with these common repairs. I would recommend any new landlord take a few construction classes to brush up on some of the most basic duties in which you will be required to perform. When a upkeep is needed, make sure attend to the repairs in a timely manner. It will keep your tenants happy and your property in good condition.
It’s Your Property, Treat It Like It
Everyone who rents dreads entering into a lease from a ‘Slumlord’. Your ultimate goal should be avoid operating like one at all costs. If you are under the impression that you will make more money if you act like a Slumlord, you are wrong. If anything, you are sacrificing very short term gains for long term trouble. When caring for your rental properties as if you were the habitant, you will build a better long term business by allowing your assets to appreciate thanks to good upkeep and good tenant relationships.
If you have any questions about getting into the real estate investment business, please feel free to contact us through the form below!