Real estate investments can be lucrative and rewarding. However, they can also be stressful. If you’re not prepared to be a landlord and you don’t know what’s required in the rental market, you’ll find yourself at a serious disadvantage.
Even experienced investors make the same mistakes over and over again. Today, we’re talking about some of the most common investment pitfalls and how to avoid them.
Don’t Buy the Wrong Property
One of the first risky pitfalls is buying the wrong property. Remember that you’re not buying a home you’re going to live in. Don’t form an emotional attachment to the home, and don’t insist on things like garden tubs in the bathrooms and stainless appliances. Those elements are great, but your tenants might not care about granite counters. What they want is a safe, comfortable, well-maintained home in a desirable location.
You have to make sure you’re buying a property that will be easy and profitable to rent. Crunch the numbers and talk to a property manager about the tenant pool and how long it might take to find the right tenant. This is an income-producing property, not the place you’ll raise your kids.
Price Your Home Correctly
Overpricing an investment home is an extremely common pitfall. Every landlord wants to earn as much possible in rent every month. However, if you don’t pay attention to the market and you price your property at a rent that good tenants won’t be willing to pay, you’ll face a longer vacancy. Those extra days, weeks, or months of vacancy will be far more expensive than a rental rate that’s $100 lower per month.
The market drives your rental value. It doesn’t matter how much your mortgage and expenses are. It doesn’t matter how much cash flow you want to earn. Price your property accurately and competitively, otherwise you’ll lose money.
Place the Best Tenants
The value of good tenants cannot be overstated. Your entire rental experience depends on your ability to identify and place high quality residents. Make sure your marketing is widespread and strategic, and screen every application carefully. Look at financials, criminal and eviction backgrounds, and income. Talk to former and current landlords. Follow all fair housing laws. You don’t want to get into legal trouble because you’re unintentionally discriminating against applicants.
Don’t cut corners and don’t follow your instincts when it comes to tenant screening. Trust the data you collect and don’t offer your home to someone who doesn’t meet your criteria.
Respond to Maintenance Immediately
One pitfall that we’re always surprised to see is when owners don’t make maintenance a priority. You want to protect and preserve the condition of your investment, so make sure it’s in good shape all the time. You want to keep your good tenants, too, so be responsive to their repair requests.
A well-maintained property is crucial to your investment success. Don’t ignore those small repairs. Pay attention to routine and emergency maintenance and make it a priority.
Use Professional Property Management
Our do-it-yourself culture can be a huge pitfall when it comes to investing in real estate. Everyone loves a DIY home decorating project, but when it comes to managing an investment property, you want to gather the resources and experience of experts. With a great property management company, you’ll have a much better and more profitable investment experience.
We’d be happy to tell you more about avoiding investment pitfalls when it comes to your rental property. If you have any questions, please contact us at Rentals by Mark.