When investing in rental properties, your ultimate goal is to make a profit, right? In a perfect world, this could be achieved by simply buying a property, putting it on the market, and finding a tenant. But, as with most things in life, it isn’t quite that easy. The keen investor knows there are a number of factors that must be considered every step along the way and we’d like to share a few of those with you.
1. Do the Math
You’ve found a property to buy and it’s listed at a great price. Great, you’re done! Not so fast – there’s much more to consider besides the listing price, monthly mortgage, and rental rate you’ll charge. Things like taxes, insurance, maintenance costs, occupancy rates, and HOA-related costs all must be factored in to determine if your investment will be profitable in the long run.
Your overall monthly payment is more than just the mortgage itself – it’s everything encompassed in the acronym PITI. What’s PITI? Pity? No, no don’t pity yourself just yet, it isn’t that much math, we promise. PITI stands for Principal, Interest, Taxes, and Insurance – principal being the amount of your payment that goes towards paying down the actual mortgage, interest of course is portion of your payment that goes towards paying down the interest on your loan, and then property taxes and homeowner’s insurance. Calculating PITI will give you a more accurate idea of what your monthly payment and income will be on an investment property versus considering only the mortgage and interest payments, thus allowing you to set the appropriate, market-supported rental rate.
Further, you need to be sure you have enough money set aside for maintenance needs as well as consider HOA dues (if applicable) and vacancy periods. Are you hiring a professional property management company to care for your investment company? This is highly advisable and a cost that should be factored in as well.
2. Keep Things Organized
Whether you’re a seasoned investor or a first timer, being organized regarding paperwork, financial documents, insurance policies, etc. will make things so much easier. Though a professional property management company will retain copies of records, payments, expenses, leases, and pretty much everything related to your investment property, it certainly doesn’t hurt for you to keep your copies organized as well.
If you prefer to keep things digital, have all pertinent documents in specific folders related to each one of your investment properties so you can easily access them when needed. More of a pen and paper type of person? Keep things neatly organized in folders that you can get to when needed.
This especially comes in handy in coastal areas when hurricane season arrives – if a storm decides to swing by for a visit, knowing exactly where that insurance policy is will be one less thing you have to search for in an already stressful situation.
3. Know How to Find the Best Properties in Your Investment Area
When searching for an investment property, don’t get drawn in by an attractive price tag. There are many other factors to consider that will ultimately determine the profitability of your investment. Some examples are the property’s location, whether the type of property is currently high in demand, and its overall condition. These things will heavily determine whether the property will rent easily. Is it in a popular area of town? Is it a condo in an area where people are primarily looking for single-family homes? Does it need lots of expensive repairs? Are the surrounding properties in a state of disrepair? These are all important factors to keep in mind.
That may sound like a lot of homework but don’t worry – working with both a professional property manager and a real estate agent will allow you to receive advice from local experts who can guide you towards the right types of properties, thus increasing the chances that your property will rent quickly at a great rate.
4. Think about Tax Advantages
As we’ve discussed before, there are many tax advantages available to rental property investors and it’s always a good idea to keep those in mind when choosing an investment property to purchase. Rental property owners can deduct certain expenses related to the property from their annual incomes which is certainly helpful come tax time. If you’re considering making some property upgrades, many of those things are tax deductible while the property is being used as a rental. Professional services – think attorney fees, property management costs, etc. – can often be deducted as well. Remember, always consult a tax professional before banking on any specific benefits.
5. Make Sure You’re Advertising in the Right Places
Most house hunting, or at least the preliminary stages, is done online these days. And, sure, anyone can go on Craigslist or Facebook and post an ad, but are those ads going to attract the types of tenants you want renting your home? Maybe, maybe not. If you’re working with a professional property management company, they will be able to put your property advertisement in front of the right people on their own websites as well as popular real estate websites to ensure maximum exposure. Plus, prospective renters are much more likely to trust ads on these types of sites vs. social media.
6. Thoroughly Screen Tenants
No one wants to think that people will blatantly lie but, let’s face it, they do. You cannot simply take a rental application at face value and must do your due diligence in checking the information that has been provided. Running credit checks and verifying income are important factors in ensuring you’re getting tenants who will pay rent on time and care for your property. This is another place where professional property managers come in handy – they have thorough screening processes in place and approval criteria that must be met, alleviating you of the burden of combing through every applicant’s information. This is a great benefit to landlords as it allows you to rest easy that you’ve got someone reliable in your home.
So, that’s it right? Do these six things and you’ll be in landlord heaven? Not exactly – while these are some of the most important things you can do to ensure profitability, there are many things that go into making sure you’re going to have a successful investment experience. Working with a professional property management company will relieve property owners of a lot of stress as they can take care of many of these things for you – everything from assisting you in picking out the right property and running the numbers to screening your tenants and keeping everything organized.
Do you need assistance in finding your next investment property or would like to learn more about beginning to invest in rental properties? Reach out to our business development director today via our website or at 910.239.1338.
Sweyer Property Management is a full-service professional property management company that specializes in all aspects of rental management. If you’re an investor or property owner looking to learn more about our services and what a professional property manager can do for you, reach out to us today at 910.256.3031 or via our website.
Sweyer Property Management has exhibited continuous growth throughout the Wilmington, Leland and Hampstead areas while maintaining an excellent Google+ rating for customer service. To inquire about the company’s full-service management services or to take a tour of homes for rent in the area, visit them online at WilmingtonForRent.com.
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