Over the years, property investors have risen to the spotlight as being some of the most financially successful entrepreneurs in the world. however, much as with many other businesses, there have been far more failures than successes experienced by investors. Many of those that have failed in property investment experienced losses right from the start of their trial. Here are some of the lessons that the most successful rental property investors have shared with novices on how they too can make the most of their investment.
It is a tough business
If some of the biographies of top real estate gurus like Donald Trump are anything to go by, being a landlord can be tough business, in spite of the potential for rich rewards. Many that go down this road were at one time or another tenants themselves. From this point of view, it must seem that being a landlord is a pretty easy job.
After all, it does not require a 9 to 5 commitment. In reality, there are many stresses associated with rental property ownership, including being called upon at odd hours to deal with plumbing problems, trying to evict a defaulting tenant, and realizing property taxes have just been hiked.
You need to have a plan
When buying rental property you are entering into business and the best way to make it a success is to have a plan. Doing the necessary research and running the numbers is absolutely important. You cannot expect to naturally have a sixth sense as to what makes the best rental property investment. You need to study the area, prevailing rates, market trends, value of the property, demand and so on. Proper financial analysis will tell you if a property will make you a good return, not the quaint nature of the landscape around it.
Buy local
There are many property investment opportunities to be found around the world. Unfortunately, many are the proverbial pie in the sky. When you are not familiar with an area, you risk investing in a flop. Buying a local property affords you the opportunity to do better research into the area, and ascertain what kind of reasonable return you can expect. No matter how good pitch, avoid foreign, or even out of state, investments, especially when you can ill afford a loss. Buying local also offers the benefit of being able to more easily check up on the activities of your tenants, the condition of your property and if your property manager is doing his job.
Stash away some reserve money
The cost of renting out a property does not end with you finalizing on the mortgage with your bank and giving a property management firm a cut. There are many sudden and expensive costs that can pop up out of nowhere, even with a relatively new property. The air conditioning system could break down, a mold infestation discovered, or even a malicious tenant causing deliberate structural damage before moving out. All this could run into thousands of dollars to fix before you can get another tenant in. As you enjoy the financial rewards of being a landlord, you need to set aside a good amount of reserve money just in case the unexpected happens. This can also come in handy should you have a vacancy. Simply because you lack a tenant does not mean the mortgage lender will suspend your loan in animation. You can use your reserve money to keep up with mortgage payments as you work on finding a new tenant.