You’ve got a little extra money in your pocket. You’re hoping to make it grow into a lot of extra money in your pocket. Investing in real estate and managing property sound like solid ways to increase your cash. Before you run out and buy the first house you see, don’t fall for these myths about managing property.
Myth #1: Incoming Rent Will Cover All Expenses
Do not count on tenants to cover your monthly mortgage payment. You may have months in which you do not have a tenant in your property, in which case you’re covering the mortgage yourself. Even if you do have a tenant, there are the added expenses of insurance, taxes other potential expenses.
If you’ve hired a Rent Manager or Residential Property Manager to manage your property, their salary needs to be paid as well. To cover all expenses, you’d likely have to charge a much higher rate than just what your monthly mortgage payment is, which isn’t reasonable if you want to obtain and keep a good tenant.
Myth #2: Rental Property Income is Passive Income
A lot of work goes into managing a rental property. It’s not as simple as buying a house and just collecting rent from your tenant. There is nothing passive about it! Owning a home is work. Things break and need to be fixed. Incoming rent needs to be collected and accounting needs to be done on an ongoing basis.
If you opt to be your own Rent Manager you’ll have to complete all these tasks yourself. If you hire someone to act as your Rent Manager, you need to make sure you can afford their salary and ensure they are taken care of as an employee. However you proceed, you’re going to have to work to manage your income property.
Myth #3: Haunted Houses Are Cheaper
Even if you can find out if the house you’re considering purchasing as an investment property is haunted (which can be difficult to do), there is no truth to this myth. Homes in which a tragedy occurred do not sell for less money either. And the leg-work required to determine if something unfortunate happened within a home is not worth your time and effort (there are no laws requiring the disclosure of tragedies occurring on a property).
Overall, buyers expect to get more bang for their buck on supposedly haunted homes, but that is not usually the case. Most states don’t have a clear-cut rule regarding disclosure of stigmatized properties. You may want to check out our other article on 10 Awesome Properties with Horrifying Secrets to see how some have faired in the market over time.
Myth #4: Don’t Pay Extra On Your Mortgage
You may be tempted to not pay extra on your mortgage even if you have the liquid cash to do so. Managing property finances closely by paying down a mortgage early saves you money in the long run. It is possible to cut your overall interest payments in half by paying extra each month, which is likely more than you’ll make in the real estate market. That’s money saved you can use for the purchase of additional properties.
Myth #5: An Improving Economy Makes Property Management Less Lucrative
When the value of properties is on the rise due to an improved economy, this doesn’t mean there’s less money to be made by managing property. You don’t have to buy a foreclosure property in order to make money. A good investment doesn’t mean a low initial purchase price.
Secure cash income from tenants is the best way to ensure your venture into managing property is successful. The improved economy only means there are more people able to pay their rent, which is good news for you as a Property Manager.
The Plain Truth
There is, without a doubt, money to be made by managing property. Not falling prey to the myths and fallacies that exist regarding property management can ensure you have a long and successful career as a residential property manager.