When you own a rental property (or when you’re thinking about purchasing one), you have a lot to consider. Getting the most out of an income property is a tricky business, and landlords need to think about all of the important variables — including the ones that we’re going to lay out below. Read on to make sure that you’re covering all of your bases.
Location, location, location
The decision to invest in an income property is a big one. While rental properties are a fantastic way to earn passive income, not all such properties are the same. And when it comes to a purchase this big (and this important to your future income), you really need to do your research.
Consider the property’s condition, price, and other factors — and consider location most of all. Is the property near places of work? What about recreation? Being near recreation options and attractions is important, the Lansing sporting event experts at the Greater Lansing Sports Authority point out. And don’t forget about roads and public transit options. It may be OK to buy a property a bit outside of the prime spots if that property affords access to the places that would-be tenants want to go.
Building management and maintenance
When you’re a small-time landlord, you may think that you can handle most basic property maintenance tasks yourself. But if you’re not relying on trained professionals who know how to spot potential problems before they ruin the value of your property, then you’re at a serious risk.
The reality is that problems with real estate properties do not get better on their own. The maintenance and repair issues that you see — and the ones that you don’t see — are only going to get worse and worse as time goes on. And when that bill finally comes due, it can be expensive indeed.
So be proactive about your building’s maintenance. Pay now for contractors who know what they’re doing, so that you don’t end up paying a steeper price later on.
How are you advertising your property? How are you setting up your rental application? How are you performing background checks on would-be tenants?
If you’re smart, you’ll turn to landlord software solutions when you tackle these tasks. Good landlord software will make it a lot easier to set up shop, and you’ll find great options online that will help you post listings with photos and videos of your space. Considering that the overwhelming majority of renters now start their search for their next house or apartment online, you had better be sure that your space is listed properly on the popular websites that your would-be tenants are going to use.
Your emergency fund
When you’re investing in an income property, you’ll have a great source of passive income and a very valuable asset. But what you won’t have is a ton of liquidity. Selling a real estate property takes time, and the great wealth that it’s helping you build may not be accessible in every way that you’d hope.
So make sure that you have a margin for error. Don’t spend every last dime on your property — make sure that you’re saving both for your long-term goals and the emergencies that you can’t see coming. What happens when you suddenly need to put $5,000 of work into the apartment? What happens when a tenant suddenly moves out? To get through cash crunches like this, you’ll need an emergency fund.