Rental Property investing will continue to make investors’ money as a main business and as a side hustle for some extra cheese. Some will need a helmet for the possible pit falls and traps that lie ahead. Those who educate themselves, have realistic expectations going into it, and know their risk tolerance will fare better chances of a positive outcome.
Here are 8 tips that provide good insight to avoid some hard falls and traps.
- Educate yourself – Read books, blogs, and anything you can to become educated on the subject of real estate investing. Knowledge is power. The best advice is to learn from someone else’s mistakes not your own.
- Know the market or find a Real Estate Agent who does – Knowing the market can help to reduce questions about possible rental rates and pricing. It can assist you with knowing about the demand for local rentals. Where is the demand coming from, is it students, retired couples, or small families? Some properties can have more turnover in certain areas, due to the type of renters, rental rate, and the type of property. Having a good agent who has experience, and access to additional information in an area can make a huge difference in the selection process.
- Save your money – When times are good, and the property is rented, save your positive cash flow. When the times are not so good, such as vacancies, issues with maintenance, bad appliances, or having to repaint between tenants, that saved cash will come in handy. It can help with additional cash outlays. A rental property is a business unto itself. Manage the business well, like any other business, for the days when circumstances change.
- Hire a tenant rep – In the commercial real estate world this is an agent who specializes in representing tenants and their negotiations for space. In the residential real estate world this is often a property management company, or an Agent who has experience in residential tenant/landlord negotiations. These entities have resources to qualify tenants for income, and perform top notch screening for criminal, Megan’s list and credit. I know of a great property management company in Corona who can do this for you, can you guess?
- Know your risk tolerance – Property investment carries certain risks associated with it. Evaluate your income, savings, and your financial stability. Things are not always peachy. Be ready and be tolerant, especially if you choose a challenging rental property. Asses your current financial position and what your risk tolerance might be.
- Stick to your strategy – If you have a strategy based on certain financial factors, risk tolerance, and other criteria, try not to break your strategy, especially due to a bidding war and your need to win. Stay focused and stick to your strategy. Do not over extend yourself or your budget.
- Overestimate expenses – As with any business, always overestimate what you think your expenses might be. This will help you later in the event expenses increase for certain events.
- Look at many properties – Deals are great, but there could be many more out there. Look at many properties, and don’t just focus on the first couple that seem good. Take your time, do your research and look at as many properties you can. Evaluate each one for criteria mentioned in this article and any more you can come up with that will help you make the best decision in building a property portfolio.
We always wish you the best at Signature Sales & Management. If you have any questions, want one of our agents to work up a list of possible investment properties, and or you are looking for a property management company in Corona and the Inland Empire, give us a call at 951-520-0058