Real estate is one of the best investments you can make. Owning investment property is a dream for many people, and it can be easier than you might think. In our latest post, we will explain how to build wealth over time using investment real estate!
While you can usually acquire your first rental property pretty cheaply, but before doing so, you should make sure owning rentals is the right choice for you. It can be a great way to make money, but if you detest the process, you might prefer putting your money elsewhere. Before investing in Metro Detroit real estate, ask yourself…
Is Being A Landlord Right For You?
They say that more millionaires are created by real estate than through any other means. Much of this wealth is created through rental properties. But do you know what goes into managing a successful rental? To successfully rent a property, you need to secure great tenants, charge the right amount of rent, and keep the place in tip-top shape. The process can be a chore or a breeze depending on the property and the tenant therein. Before you buy, make sure you are up for the challenge and are prepared to handle any obstacles that come your way.
The Costs of Owning A Rental Property
Maintenance is a large cost of owning a rental property and can vary widely between properties and years. One year you might only spend a few hundred on basic everyday wear and tear, and the next year you will need a new roof and water heater. One way investors estimate maintenance costs is to put away 1% of the properties value toward maintenance costs each year. For example, a house worth $200,000 would cost roughly $2,000 in maintenance costs per year.
Another ‘cost” you will inevitably face is the cost of vacancy. Having high vacancy rates will negate any profits you have made on the property over the year. Of course, if a tenant leaves unexpectedly, you will be able to retain the deposit, however, you will want to get the house rented again as quickly as possible. Tenant retention should be at the top of your list.
It’s A Numbers Game
What makes a property worth it? According to Investopedia, there are 10 features of a potentially profitable rental property. These include the neighborhood, schools, future development, crime rates, local amenities and more. Your property has to have enough going for it, that you are able to charge enough in rent to make a profit. Hopefully, a good profit!
As an investor in rental properties, there will come a time in which you seek outside help. Collecting rent, managing maintenance requests, screening tenants and handling turnover can become a fulltime job, especially when more than one property is owned. It’s important that you find the right property management company that will not only meet your needs but the needs of your tenant. Keep in mind, they are operating on your behalf, and you will always want to put the best foot forward.
Increase Rent When The Time Is Right
Don’t be afraid to raise the rent. We have worked with many landlords, some fail to raise the rent… ever! We have seen tenants living in a house for years at a time without a single rent increase! Of course, the increases need to be merited and reasonable in comparison to rent hikes in other nearby buildings. Keep yourself on par with comparable properties in your neighborhood, and you shouldn’t have a problem.
Don’t Overlook Late Fees
Stand firm, charging late fees whenever merited. You don’t want to find yourself in a position where tenants take advantage of your kindness. If they pay late once without any consequences, they are more likely to do it again.