Is the price of real estate low in your area? Are you thinking about purchasing one or more investment properties to rent out to tenants? Investing in real estate can be a great way to make some extra income on the side. Unfortunately, if you don't do any research into owning rental properties, you may wind up discouraged and could potentially lose money on the venture. Some things to keep in mind when investing in real estate include:
Hire a property manager: Unless you like being woken up at 2 am about plumbing issues or other problems that your tenants are facing, hiring a property management company is a good long-term strategy. If you own just one or two properties, you may think that a property management company is unnecessary or is overkill. However, the fewer investment properties you own, the more likely it is that you still have to work a regular day job to pay some or all of the bills. You don't want to risk losing this job because you had to take time off to handle various tenant issues. A good property manager will enable you to continue to collect money for less effort on your part.
Set aside money for repairs: If the mortgage on your investment property is $1200 and you're able to get $2000 per month for rent, that can seem like $800 worth of pure profit. But it's important to remember that real estate doesn't work like that. As a landlord, you're expected to keep the property in good condition. This means fixing plumbing or electrical issues, some of which can be costly. If you've hired a property management company, they may already be setting aside some of the rent in escrow for such a situation. Otherwise, you should open an extra account to save money for possible future repairs.
Prepare for vacancies: There are a number of costs that are associated with tenants moving out before you can move new ones in. You may have to pay to have the property cleaned, the carpets replaced, or the walls repainted. While this is going on, you'll still have to pay the mortgage, and it may take some time to attract a new tenant. While having a good property management company can make this process go more quickly, there are still no guarantees. Aside from your repair fund, it's a good idea to have 3-6 months of mortgage payments saved up before you start to spend any of the extra money from your rental payments.Share