Investing your hard-earned money in real estate can be a good idea…unless that property is dragging you down. If you choose the wrong property or fail to run it as a business, you could be spending money on an investment that will have no returns.
Before you even become a landlord, here are some general mistakes to avoid when looking for a suitable investment property. Your first lesson of investing is to find a property that is in a great location. This means a safe, stable neighborhood that has decent access to highways, shopping, and schools. Take the time to research the latest real estate trends in the city or suburb you are considering or ask an expert such as a local realtor where they would recommend investing. Check out the area in person and look for nice, well-kept lawns and houses to make sure that it’s an area worth investing in. Ask yourself: Would I be happy living here myself? Location is everything when it comes to real estate, so this is the first consideration.
Once you have found the proper location and property, you need to decide on the amount to charge for rent. The best way to charge an appropriate amount is to do your research on similar properties. You don’t want to set your price too high or too low. Take into consideration the property’s location, age, condition, and neighborhood. Set the rent too high, and no one will want to live there. Set it too low and you may not be making as much money on your investment as you should. Look at comparable recent rentals in the area and try to settle in the mid-range of rental pricing.
Next you need to make sure that you find the rent to the right tenants. Applicant forms will gather the following information: names, numbers, employer, income, previous rental history, and so on. For those applicants who look to be acceptable, take the time and make an investment in a quality tenant screening service to uncover your applicant’s full background. This will include a full credit report, a background check, criminal report, court records check, and verification of employment history. All this information will help you make the best decision when considering all your rental applicants. You want someone who is reliable, gainfully employed, and who has a consistent rental history with no evictions or charges against them.
If you think paying for a tenant screening service is a waste of money, then consider how much it may cost if you get a bad tenant. They can do thousands of dollars’ worth of damage to the property itself, which will cost you money in the long run. You may have to run down the rent check every month, which will cost you in time. And if you have to start the eviction process, that just means more time and money spent on researching your state’s laws and procedures, paying for the legal paperwork and/or lawyers, and the many weeks that go by without a rent check coming in. Making the upfront investment in a screening service is a small price to pay to avoid these headaches.
Another tip is to always investigate any of the state or local regulations and laws that could affect your investment. If you buy a property without knowing what the compliance and regulatory issues are for that area, you are opening yourself up to additional expenses and frustrations. Every single area of the country has different laws surrounding real estate property. Take the time to find out what these are in your state and community before you do anything else. This includes finding out about the laws concerning leasing – a legal lease in Texas may not be the same as one in Pennsylvania.
Finally, another decision to make when investing in real estate is whether or not to hire a professional property manager. If all the above factors sound daunting, then hiring a property manager or management company might be a worthy investment; a professional property manager or management company would already know the local laws and regulations for your area. Be sure to factor this cost in when deciding on the rent to charge; a property manager may decrease your immediate income, but you are still building equity and making money in the long run. Besides, if you learn the ropes from a good property manager, you can more easily take it over yourself if you choose. Hiring the right people at the right time is always a win-win if you are an investor.
Following these suggestions will help avoid letting your property investment drag you down. Take the time to explore your options in order to get the full return on investment when it comes to real estate.