(Article written by Joey Hayes of Dawson Property Management)
Almost every first-time investment property owner will underestimate the amount of work it takes to make their investment successful. Many new investors buy investment properties, half expecting that investing in rental properties is like stocks investing, a passive investment.
Somewhere in their minds, they think the home will run itself, and all they have to do is to collect the monthly rent. This misconception is one of the reasons many investors fail. Those who don’t fail make massive mistakes that severely set them back on their investment journey.
But the thing is, with a slight education, you can avoid the problems that most property investors face. The knowledge new property investors need to make their investment experience easier is already out there. They need to look for it.
If you are reading this, chances are you have bought or are about to buy your first investment property but don’t know how you will manage it. Your willingness to look for answers can help you avoid costly mistakes in managing your asset.
How should you manage your first residential rental property? Read on to find out.
Managing your first residential investment property
1. Do you want to be a landlord?
The skills you need to buy an investment property do not always coincide with the know-how you need to manage that property. Do not be locked into thinking that just because you own the property, you should organize it as well. Do an honest assessment of your resources, temperament, and skills. Are you suited to the demands of managing a rental? If you are not, hire a property manager.
2. Cut costs and reduce mistakes with a good team
If you decide to manage the property yourself, surround yourself with people who will help you learn. As a bare minimum, you need a lawyer, accountant, and handyman to help you get a handle on landlord-tenant law, taxes, and maintenance. Consider what you pay them as the cost of your education.
3. Future-proof your property by doing critical repairs
Do not waste money on fancy renovations. Focus on the crucial systems and main mechanicals of the home. If the roof, windows, electrical systems, plumbing, water heater, and furnace are in good shape, tenants will be happy, and maintenance costs will drop sharply. If you want to update anything, renovate these features.
4. Pay attention to the rental’s design
The rental’s design is your best opportunity to make the home attractive to a broad section of potential tenants. Don’t design the home to suit your style. Don’t follow popular trends with the design. It would be best if you use neutral paint colors. Have as much storage space as possible. Use attractive and durable materials. Also, don’t buy cheap or overly expensive appliances.
5. Invest in systems
Whatever challenges you are facing with a rental, someone else has solved them in the past. Find out the best practices for managing residential properties. Buy and learn how to use property management software. Invest in systems that help you market the home. Have strategies for keeping in touch with the tenants.
6. Know your costs and manage them
Be familiar with the costs of managing the property. When making financial projections, create sufficient room for unexpected events. Identify expenditures that are likely to become a drain on your finances. Keep a tight rein on expenses and make sure you don’t miss critical payments like mortgage, tax, and insurance. An accountant who has experience with properties can help you here.
7. Price your rental competitively
Losing $25-$100 every month is preferable to having your rental vacant for long periods. At the same time, if you price the home too low, its value will not register with the best renters, and you will attract the wrong kinds of people. The point is; price your rental at par with similar homes, but do not be afraid to drop the rent slightly to make the home more attractive.
8. Tenant screening is vital
You need just one bad tenant in your rental to destroy your investments. Time spent on tenant screening is valuable. The more comprehensive the screening criteria, the safer you will be. Do not be afraid to raise the bar for what you expect from tenants, such as requiring renter’s insurance. Your lawyer can help you avoid doing anything that will appear as discriminatory.
9. Maintain good records
That is one of the benefits of investing in decent property management systems. Keeping records of all expenses – repairs, maintenance, insurance, rental payments, etc. – will make your accountant’s life easier during tax season. It can help you save money, and you will have an objective measure of the property’s performance.
10. Keep in touch with tenants
Have a welcome package for tenants when they move in. Educate tenants about clauses in the lease and valuable ways to care for the home. Also, maintain a record of their significant dates; birthdays, anniversaries, etc. Pop in once in a while to say hello; tenants dislike landlords who show up only to pick up the rent or when there are problems.
For more info, go to: https://www.dawsonpropertymanagement.com/