Check These Out

4 Tips to Become a Successful Landlord

Monday, September 24, 2012 posted by Tommi Crow

   Owning a piece or real estate with the objective of earning regular cash flow is probably the best known and most common form of real estate investing.   The rental property is the way a lot of people in the “middle class” have found a real opportunity to make a fortune, if they know what they need to be successful.

Thousands of distressed and vacant properties, historical low interest rates and rapidly increasing rental rates have converged and created a great opportunity.  If you are considering becoming a landlord, focus on 4 basic fundamentals to insure profits and success.

1.  Paying Tenants-  This may sound obvious, but the first fundamental you need to be a successful landlord is a good quality tenant who can pay the rent.

One of the biggest challenges for a landlord is keeping good paying tenants and avoiding vacancies.  If a property is vacant, it usually results in the loss of at least one month’s rent while the place is being freshened up and a new tenant is found.   We highly recommend that all prospective tenants be screened, including a background and criminal record check.   Landlord screening services are available to assist you or your property manager.

One of the best way to keep your rental occupied at all times is to invest in a location that attracts a lot of renters.  Neighborhoods near colleges and universities are filled with students who rent while they attend school…and for the most part, parents insure the rent will be paid.   Homes near education facilities are also in high demand and landlords can usually charge a rent premium for these properties.  Any area with a lot of employment opportunities will also have very good rental demand.  In many markets, larger, 4 or more bedroom homes are scarce.   Find a niche in your market that provides a stream of ready tenants. 

2.  Keep Expenses Low – Contolling costs are one of the basic fundamentals of successful real estate investing.  Some costs of property ownership are known, such as taxes and insurance…but, others are often beyond an investors ability to control. 

Property taxes and insurance are expenses that are determined by third parties.  Combined, they can easily cost at least one months rent each, or more.  On average, budget about one months rent to cover your insurance premium.  Property taxes are another matter and they can vary greatly.  High property taxes helped trigger the housing collapse in Florida, when landlords couldn’t earn any cash flow on rental property.  When searching for an investment property, make sure you verify the taxes because tax rates can easily cost as much as two or three monts rent.

3. Property Maintenance – Keeping your property in good working condition is a big part of managing a successful investment.  Again, screening tenants is key in keeping costs down.  A good tenant will certainly have normal wear and tear and your property, but they won’t do much damage.  However, a bad tenant can cause thousands of dollars in property repairs in a very short period of time.

As far as controlling expenses  is concerned…it is cheaper in the long run to address maintenance issues as they arise.   For example, a roof leak can cost a few hundred dollars to fix, but the price can quickly escalate to thousands of dollars and lost tenants, if ignored.   Although no one likes to pay maintenance expenses, being a slum lord is a costly proposition.  Deferred maintenance brings down the value of the entire property, increases ownership costs in the long term, decreases the amount of monthly rental income that can be charged and atracts renters with less than stellar references or ability to pay.

4.  Reduce Mortgage Costs – Refinance and lock in historical low interest rates.  Current quotes for investor loans for residential property are under 4%.  If you can reduce the amount of interest you pay for your money, it immediately increases your bottom line.  It is also a good idea to appeal tax assessments.  Contact your local taxing authority to see the procedure required.  Most people who go to the tax office armed with recent comps and educate themselves, can get some tax relief.

If renting is so great..why does your landlord own? For all the challenges of owning investment real estate, earning income while owning an asset that someone else pays for is still one of the best ways to create wealth.   If you get really good at it, you can make a good money, decrease the amount of taxes you pay and increase your networth multi-fold.   Lucky you.  Timing has never been better.

Thank you for visiting InfoTube.net.  Visit our site to search for homes, place a free listing, purchase an MLS or Realtor.com listing or buy marketing tools to assist you with sales or rentals.  Like InfoTube on Facebook for up to the minute news, marketing tips, design and staging idea’s.  You will LOVE it!