Rental Investment Tips
Investing in a property and renting it out to tenants to cover your mortgage can be an effective way to build your personal equity, but it usually isn't hassle-free. A successful landlord needs to have a good grasp of finances, building and renovation, and how to deal with difficult tenants diplomatically.
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Avoid Money Pits
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Up until the moment you purchase a property, you can simply walk away from a lot of potential problems. Examine the property with a professional home inspector and a critical eye. There are many properties in the world; it isn't worth the heartache to buy one with problems. Look at the roof, the foundation, the electrical and plumbing systems, the grounds, the surrounding neighborhood and the general interior and exterior condition of the building. Listen carefully to the advice of the inspector. Remember that there is a reason that cheap buildings are cheap; buying a more expensive one might make you more money in the long run.
Avoid Problem Tenants
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Like buildings, prospective tenants need to be looked at critically. Don't rent to anyone without references, no matter how harmless they may look. A lot of well-meaning people turn into problem tenants because they have financial problems and can't pay their rent. Other tenants are not so well-meaning and will damage your property and cause other problems. Have a clear and fair lease agreement that is signed by both you and the tenants, and be sure that they understand all of its provisions before they move in. If you get good tenants, treat them well and go out of your way to hold on to them.
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Pay Down Your Mortgage
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The faster you can pay down your mortgage, the more money you stand to make on your investment. Allocate a certain amount of your rental income for maintenance and improvement of the building, and put the rest toward the mortgage. If you can increase your monthly payments, as well as making prepayments, this will make a huge difference in your amortization date, particularly if you can do these things in the first few years of the mortgage. If you are employed elsewhere and your investment property is a side project, this is an ideal situation, because you won't need the rental income from your property to live on and can devote it all to paying off the mortgage.
Keep Up With Maintenance
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In fairness to your tenants, and in your own financial interest, you should take care of all maintenance and repair issues in your property promptly. Issues that are particularly important to fix immediately include roof leakage, dry rot and plumbing problems. The longer you leave these problems, the more extensive they will become and the more they will cost to fix. You will also lose the goodwill of your tenants if you are hesitant about keeping your end of the bargain and providing a clean, safe and well-maintained building in exchange for the rent that they pay you every month.
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References
- Photo Credit house image by Earl Robbins from Fotolia.com
