Good rental property investments can be a boon to anyone looking to generate passive income. However, as is the case with most real estate-related investments, rental properties generally don’t come cheap. While desirable properties in desirable areas stand to net you a small fortune each month, they’re also liable to cost you a substantial sum. Given how much money is at stake, it pays to minimize risks when investing in rental properties. So, if you’re currently looking to invest in your first rental property, the following pointers are sure to come in handy.
Research the Location of the Property
If you’re wondering, “Is real estate a low risk investment?,” the answer largely depends on location. We’ve all known real estate professionals who subscribe to the mantra “Location, location, location,” and frankly, they have good reason for doing so. People are more willing to roll with high rental rates in areas with steady population growth, robust median income and low crime. In fact, even rental properties that are lacking in space or other convenient amenities can fetch impressive rents if they’re located in desirable areas. Conversely, rental properties that are meticulously maintained and laden with modern amenities may have trouble fetching the desired rent if they’re located in
So, before committing to purchase a property, make sure to research the area in which it’s located. A little bit of research can prevent you from making a financially ruinous error.
Consider the Cost of Repairs/Renovations
It’s important for all first-time investors to understand that the cost of a property isn’t limited to its sale price. Virtually every rental property you come across is going to need repairs and/or renovations. While some properties will only require minimal repairs, others will need extensive renovations in order to be livable. Suffice it to say, this can weigh heavily on your finances and turn what appeared to be an amazing bargain into a frustrating financial nightmare.
This is among the reasons property inspections are so important. Once a professional inspection has been carried out, obtain estimates for any repairs or renovations that are deemed necessary. Should the estimates reveal that addressing these issues will prove exorbitantly expensive, it may be in your best interest to direct your attention to other properties.
Consider Maintenance and Operating Costs
Of course, repairs and renovations aren’t the only expense you’ll need to consider. You’ll also need to take the cost of maintaining the property into account. If you live in a property with shared ownership, you may be required to look into the costs you’re responsible for, but you can also talk to professionals like Michael Teys to find out more. Put simply, the type of property in question will determine how much you may be required to pay for areas like maintenance and operation.
For example, many apartment and condo complexes require full-time maintenance personnel. After all, if a property contains dozens – if not hundreds of units – frequent maintenance issues are only natural, and having a dedicated maintenance staff helps ensure that such issues are addressed in a timely manner.
Work with a Certified Property Manager
A certified property manager can prove helpful in a variety of ways. For starters, if you don’t wish to make property management your full-time occupation, hiring a dependable property manager can lift an enormous weight off your shoulders. In essence, a dedicated property manager will function as your proxy. Among other things, they’ll oversee maintenance operations, address tenant concerns and keep track of rental payments. This will ensure that tenants always have someone to reach out to and provide both you and them with tremendous peace of mind.
Of course, this isn’t to say that property managers can only prove useful to landlords who don’t wish to be present day-to-day. A good property manager can also show you the ropes of managing a rental property and help prevent you from making a plethora of costly mistakes. The lessons learned from an experienced property manager will enable you to become a more effective and efficient landlord, much to the delight of both your tenants and employees.
There’s no such thing as a risk-free rental property investment. However, there are numerous steps you can take that will effectively minimize the risks involved with such a purchase. So, if you’re currently shopping around for a suitable rental property, make sure to approach each potential investment opportunity with a certain level of caution and take previously discussed pointers to heart.