- As real estate agent/broker, real estate investing is natural next step
- Also, as real estate agent/broker, advising clients on real estate investing is next step for them and you
- Five tips to help agents, brokers and clients to become successful real estate investors, owners and property managers
There’s a big difference between purchasing an owner-occupied property and a rental property is that a rental property is all about the bottom line. Save your “falling in love with the house” feelings for your own home, where you live. Owning and managing a rental property is all about a positive cash flow. Owning and managing a rental property is all about making your money work for you rather than you working for your money.
Here are some tips to help you and your clients become successful real estate investors, owners and property managers.
- Know going in that rental properties ideally serve as another source of income. To be an additional income source, you must run the numbers to help ensure a positive cash flow. This means that you must consider the property’s monthly expenses and how much that property can generate on the open rental market. The rent needs to exceed the monthly mortgage payment, taxes, insurance and repair/maintenance budget. Assume a 20% down payment to qualify for a mortgage.
- There is a difference between higher instant returns (usually generated by properties located in expensive areas that may help guarantee that the property will hold its value) and long-term returns (usually generated by properties in a more affordable area where purchase prices are lower and equity gains may be slower). Also, if you intend to be the fixer or repairperson when the pipe bursts in the middle of the night, consider your proximity to the property so you can get there in the event of an emergency.
- Are you considering single-family homes or attached, multi-family housing? Single-family home rentals are hot currently BUT there may be more expenses for which you will be solely responsible. RUN THE NUMBERS. Or, you may want to consider investing in a townhome or condominium in a multi-family building. Remember that every housing property eventually needs a new roof…you are solely responsible for a new roof as a single-family home investor/owner and you are one of several/many responsible for a new roof as a multi-family property investor.
- Keeping your expenses low is critical. Even if the property has been untouched for years with original appliances, carpet, etc., make your renovations going in to the investment so you can make back the cost of the updating in less than a year by charging a higher rent. Again, RUN THE NUMBERS.
- If you have the skills and knowledge to do the renovations, great. If not, only do updates you know you’re able to do and hire out the rest. There is no margin of error with plumbing, heating and cooling and electrical work. Consider hiring a property manager to handle maintenance/repair requests and/or necessities. (Property managers generally cost 10%-15% of rental income.) Consider buying a home warranty to handle repairs and appliance breakdowns.
Thanks to ypn.realtor.
Also read: Does Rental Housing Need a Payroll Protection Program?, A Tsunami in Commercial Real Estate?, Global Real Estate Prices More Than Holding Their Own