Being a good, successful landlord is no less than being an astute businessman. The work sounds cakewalk – buying a house, making a new renovations and changes, then finding a tenant and renting it out for an amount greater than the monthly mortgage. But it’s hardly so simple!
The real estate market is going through a really good phase right now. There were times when investors would target just 1% of the purchase price as monthly rent, but in today’s times, a lot of intelligent investors are making as much as 2% per month! Lucrative as it may sound, the real estate market demands being alert and careful and some amount of preparation as well as planning. The next time you plan to be an investor, make sure you don’t make these easy blunders.
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Often houses come out at unbelievably low prices. But there must be something causing that. The property may be unattractive or the area may not be so desirable. A cheap deal could often be a lemon and you need to be careful about that. So, research properly, find the running rates in the area, check the property and the locality carefully.
Buying a house involves a lot of costs. It would involve closing costs, cost of renovation, maintenance costs, holding costs, advertising if required, etc. So, just calculating the potential rent you can earn won’t suffice. Figure out your budget and then proceed. Don’t rely on future income.
In the real estate market, they say time is your biggest enemy. Every time your property is empty, you are losing an income you could have earned and are incurring costs – maintaining it, looking for tenants, etc. So, its wise and logical to accept a low rent paying tenant than to wait for that fictitious high paying guy to walk by.
As an investor, you may be anxious to get a tenant, but you can’t just settle for anybody. Check the potential tenant’s credentials and obtain necessary information. You might even go a step further and obtain a credit report. Even if the tenant pesters you that he can pay the deposit right away and is getting real desperate to move in, keep your foot down and do the background check. Better be safe, than sorry.
Being an investor is not a pass-time or a hobby. If you desire a profit it requires due attention. You would need separate bank accounts fro deposits & expenses and a tax professional to help you with taxes. It’s serious business, so better be serious about it.
Have a proper legal binding agreement proving you have so and so tenant and he is in for so and so period of time since this date for this much rent. And then monitor the house regularly, check with the tenant from time to time. Don’t violate his privacy, but be on top of things.
Your house is your responsibility and being an investor is serious business. Be shrewd and intelligent while making such investment decisions. Don’t make mistakes you would regret later and then decide never to be an investor ever again! Be smart and alert, treat it like any other important business and be a great investor.
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