So you’ve decided to embark down the path of residential property management. Whether real estate investment was something you’ve been planning to get involved in or you just stumbled across a property accidentally and decided it would be a good investment, your first venture into managing property is an exciting new step! There are many aspects of residential property management you should keep in mind to ensure your venture is successful.
Financing Your Investment
Before you can own an investment property, you first have to finance the property. Research every property you’re considering purchasing. How much money do you have to put down? How much mortgage can you afford? What are similar houses selling for in the same neighborhood? What’s the going rate for rent on similar properties? Make sure you have the answers to all of these questions before you place a bid on any investment property to ensure you aren’t getting in over your head.
Residential Property Management
You’ve worked out your finances and found an investment property that fits nicely within your means. Now what? Are you planning to manage the property yourself? Do you plan to hire a Residential Property Manager to manage it for you? There is a lot to be done as a property manager. If you aren’t able to be available to your tenants for any issue that may arise you may want to consider hiring a Residential Property Manager. As you would with any employee, your Property Manager needs to be able to provide proof of prior work experience and stellar references.
Ongoing Financial Management
Managing finances in residential property management involves much more than collecting rent from your tenants. There are taxes and escrow which need to be paid in addition to your mortgage. Repairs need to be paid for. Make sure you account for these expenses when you create your budget prior to purchasing your investment property. If you’ve hired a Property Manager, their salary also needs to be accounted for. Owning investment property is not a passive form of income. You will be very actively involved in your investment if you want it to be successful.
Liability Insurance or an LLC
Even if you have the best relationship with your tenants, events can arise and stress that relationship. What if your tenant slips and falls on ice in the driveway? Who is responsible for their medical bill? You have to protect yourself from potential lawsuits. Having liability insurance will keep you covered in such instances. Another option is to set up your investment under an LLC. If you’ve hired a Property Manager, being an LLC (Limited Liability Company) will help you manage your property as an organization as well as providing you coverage when unfortunate incidents arise.
Beware of Doing Business With Friends
You may be tempted to rent your investment property out to friends. Or to hire a friend as your Residential Property Manager. Doing business with friends is always a risky business and should be entered into with caution. Even the best of relationships can be tested when landlord and tenant don’t see eye to eye, or when boss and employee have a difference of opinion.
Residential property management can be an exciting business venture and means of earning income. There are a lot of factors to keep in mind. Be aware of every aspect of residential property management. Being prepared for every possible outcome before it arises will ensure you are ready to tackle any issue and make your investment a success.