As a first-time investor, you need to put in more effort if you want a successful investment. Residential investment property is not a passive venture as many people think. The rental property requires close attention and management. Failure to do so can make you lose the benefits of being a landlord. Most first-time investors learn this the hard way.
After purchasing a rental property, the next step is to plan how you will manage it effectively. Proper management of a residential investment property has several benefits. It provides you with a steady income, the property appreciates steadily with time, you protect the quality of your rental home and attract more tenants.
However, when you fail to manage your property effectively, you lose rental income. Also, the property’s value depreciates. In some cases, you may even lose the asset.
How you manage your rental property determines the quality of your assets and your expansion in the real estate business. As a first-time investor, you need some insight on how to avoid several issues that landlords experience.
With this knowledge, it will be easy to make your investment to be rewarding. In this article, we will explore how you can manage your first residential property.
1. Make an assessment
If you are reading this article, it is possible that you are about to acquire or you have already purchased your first residential investment property. Are you searching for how to manage a residential investment and make the most out of it?
We recommend that you perform an honest assessment of yourself. Note your skills, resources, temperament, and time. Ask relevant questions and provide the answers.
- Do you have enough skills to manage a rental property?
- Will you be able to handle the demands of managing the rental?
- Do you have the time?
- Will I be able to field all the calls and answer questions?
- Do I want to be responsible for getting repairs made when renters call. with broken items?
From this assessment, you will know your stance. If you cannot meet these demands, it will be wise to hire a property manager.
Property managers will help you to circumvent the intricacies of managing residential investment property. A professional property manager has the appropriate training, tools, and experience to handle the issues of rental properties.
2. Find the right tenants
Before you find the right tenant for your property, be ready to wade through several unsuitable ones. We recommend that you only select high-quality tenants. Such tenants will respect the terms on the lease, pay their rent on time, and maintain your property in good condition.
To get high-quality tenants, you need to invest in tenant screening. The time you spend in this process is never a waste. That is because only one bad tenant is enough to ruin your investment.
Some new landlords are afraid of raising the bar for their expectations from tenants. It should not be a problem for you to set up comprehensive screening criteria. Screen prospective tenants to know their rental history, criminal records, financial past, and so on. Also, ask for renter’s insurance.
The screening process should not appear discriminatory. You can seek help from your lawyer to avoid acting in a way that shows discrimination.
3. Keep up with routine maintenance
A rental property has several components that require routine maintenance. Failure to do so can cause breakdowns in various systems. You need to pay close attention to your foundation, roof, floors, windows, doors, electrical, and plumbing system.
Also, you need to maintain a high-quality sanitary condition in your rental property. It is essential to conduct routine inspections and repairs on the various components. If tenants make complaints of breakdowns, respond swiftly. Your tenants will be happy if you tackle emergencies promptly.
4. Price your rental competitively
If the price of your rental property is too low, high-quality tenants may not appreciate its value. The house may only attract bad tenants. However, when your rent is too high, your property may remain vacant for a long time. For this reason, it is preferable to price competitively.
Look at the rent of similar properties in the neighborhood before fixing yours. You may reduce your rent slightly to attract renters. It is better to lose a few dollars monthly (about $20-80) than to keep your property vacant for a long time. Remember, during vacant periods, you will still spend money on property maintenance.
5. Manage your taxes
There are several taxes that landlords pay for their rental properties. Sometimes, these taxes can be confusing and constitute a burden. It is essential to learn tax management of rental properties. Also, you need to organize your records in preparation for tax seasons. If you do not perform these properly, the taxes may consume your entire income and even put you in debt. With adequate tax management, you will gain from the relevant tax deductions and also earn more income.
The bottom line
Owning a residential investment property is quite lucrative. However, it entails close attention and proper management. We recommend that first-time investors seek professional assistance for issues that seem confusing.
Additional real estate resources
Paul Sian – Find all the differences between long-term rental vs. short-term rentals as investments.
Bill Gassett – 6 steps to finding the perfect rental home.
Tammy Emineth – Should we rent or sell our vacant home?