Many turn to real estate as a safe and traditionally secure investment. However, being a successful real estate investor entails much more than signing the dotted line and collecting on your commitment.
There's research, finances, rent roll, locating renters, and a vast range of responsibilities, such as ensuring your residents' happiness and security. So if you've recently become an investment property owner or are after insights into the steps involved in developing a successful property management system, this is the blog for you!
Why do you need a property management system? The combination of the right software and processes help generate profitable rental properties. Follow these eight steps for success as a property owner!
Investing in a rental property is like being a small business owner. You have an income-producing asset, debts, liabilities, and legal obligations to your residents.
At the same time, it's a hugely emotional decision involving financial risk. Especially for first-time buyers, it's a huge life decision. This means you must be financially aware and objective. Run the numbers to ensure you have income for mortgage repayments and taxes, legal payments, insurance, emergency funds, and maintenance.
In addition, just like a business, you'll want to create a network of external partners, such as an accountant, tax attorney, and financial planner, to assist with higher-end or overly specialized components.
Choosing the right residents during tenant screening is one of the most significant decisions for property owners that will guarantee financial success and the security of your asset.
The dream in all property management is to curate long-term, rule-abiding quality tenants and limit eviction occurrences. When running a background check, it is good practice to research credit and criminal history, financial reports and stability, and references from previous landlords. It's common for first-time renters to outsource property management services to the best property management Baltimore offers, like Renters Warehouse BW Metro.
Clear communication can save not only administrative nightmares but also any future financial repercussions. Therefore, ensure that all communication is written and recorded in your tenant file and that all tax, purchases, expenses, repairs, and replacement documents are stored safely and organized. A property management system can help you keep track of pertinent details and dates.
Your lease agreement should have no gray areas, especially regarding payment terms. A helpful way to ensure all key areas are covered is to create a move-in checklist for reference during the move-in process.
As the legal principle stands, negligence of the law is no excuse. Therefore, successful property investors study local, federal, and state laws to understand the legalities of both their obligations as property investors plus those of their renters.
For an introduction, consider taking a short course, joining local groups of rental property owners, and reaching out to professionals such as managers and tax specialists for assistance on complex matters.
Rental property insurance will protect your investment from property damage and disasters. Large-scale events such as property fires can incur massive financial strain and, without appropriate insurance, leave many first-time investors in financial trouble.
Be proactive in this regard and select the best insurance for your circumstance. Insurance will also protect you in cases of harm and injury to renters and can be interpreted as negligence on your part.
Poor rental property maintenance leads to discomfort, complaints, and your residents' health risks. Due to this, creating timetables and calendar alerts for updates, building a foundation of trusted providers, and the ability to deal with issues swiftly will help minimize maintenance needs.
Pay close attention to riskier components such as stairs, handrails, smoke detectors, fireplaces, and furnaces. Take a proactive rather than reactive approach to maintenance issues and updating amenities.
When deciding on a location for your investment property, consider your experience in the industry and commitment level. For example, a first-time investor will want to invest in an area they know deeply, whereas an experienced investor may consider long-distance options.
Consider the types of residents looking for a rental property in the area, e.g., is it in a school zone? What is the target industry of the region? Are prospective tenants likely to be longer term, like families with school-aged children, or more transient, like University students?
Follow the steps of market analysis, and don't be afraid to seek professional help. Some additional factors to consider include age demographics, the internal migration rate, and the local economy's strength. Finally, when considering a location, look at similarly listed properties that you are considering to determine a fair rental rate.
The real estate industry is ultimately a people-first industry. Therefore, your success relies on your commitment and those you surround yourself with—you should not be expected to know everything!
Building a network of professionals such as CPAs, property managers, property attorneys, mentors, and experienced real estate investing peers will help protect your asset and make it as profitable and safe as possible.
There are many moving parts involved in being a successful investment property owner.
Thankfully, the best property management company, like Renters Warehouse BW Metro, can take control of every step of the journey, from tenant placement to rent collection.
The initial stages in the property investment journey can be stressful. However, with a team of experienced property managers behind you, you'll be on the road to success in no time.
Property investment is a rewarding, fun, and often challenging process. However, by following the steps above, you're giving yourself the best opportunity for success in the industry.
Investment property ownership requires dedication, time, and a willingness to be open to feedback and to learn from mistakes. For a helping hand or professional input, Renters Warehouse BW Metro has the experience to set you up for success and stress-free property ownership.
Learn how to find the best property manager for your properties! Download our refreshed resource, "Updated: The Guide to Finding the Best Property Manager.