Many people dream of becoming a landlord, owning several investment properties, each of which provides financial security as tenants cover the expense of the mortgage(s) and then some. However, in today’s real estate market, the promise of profit can sometimes be elusive if you don’t pay attention to some fundamentals.

In. most cases, it is advisable to work with a property management company, who can guide you in the decisions that always go along with  becoming a landlord.  We will attempt to cover several of those here.

1. One does not simply pull a number out of thin air when determining what the rent should be on a given property. Properly assigning rent value is accomplished by determining the actual rental market value of your property. It is common to experience rents that are LESS than enough to cover a mortgage and expenses. Before becoming a landlord, you will want to make sure that it makes financial sense to do so.

2. You will need to set up (and maintain) an expense account to cover things like maintenance, management fees, and the occasional repairs that will need to be made.  The older your house, the more you should budget for your expense account. Many of these expenses can be quite expensive, and as a landlord, you cannot afford to be unable to afford them. If the heater goes out in the middle of winter, you are obligated to replace it post-haste.

3. Finding the right tenant is an art form… and best left to the professionals.  You might think that by becoming a landlord, you’ll have instant access to a ready pool of tenants (ie. family), but in fact… that rarely ever works out well. The greater the level of informality, the more likely you are to experience short or late payments, and many more tenant requests for repairs and/or upgrades. A professional property manager knows how to screen for the right candidates, especially zeroing in on those who will care for the property and pay on time, every time.

4. On the topic of payments, it becomes necessary to consider what happens if/when your tenant fails to pay, or pays late.  In some cases, eviction may be the proper course of action.  However, eviction is not as simple and straightforward as asking your tenant to leave.  There are many laws in place that must be rigidly adhered to. In the event that you have to take your tenant to court - you are responsible for all the attorney fees and court costs. This is another great time to have a professional property manager on your side.

5. Another wake up call to becoming a landlord comes when you realize that between tenants, you are not bringing in any money, but you are still required to cover all of the expenses of maintaining your home. If tenants damage your property, or you haven’t properly maintained it, you will have extra expenses to bring it back into proper condition for rental.  Every day that your home is empty, it’s an expense that must be accounted for.

These are just the tip of the iceberg for those considering becoming a landlord. It’s been stated several times that there’s genuine value in establishing a relationship with a professional property manager.  We stand ready to advise and assist you, should you desire our assistance. Contact us today, and let’s discuss your needs.

When looking at getting into the investment property game, there are many things to consider before you jump in. This article is designed to be a helpful guide to considering some of the more important elements in real estate investment.

1. Start with a single-family home. In most cases, investing in a single-family home is a much safer, smarter way to get started. The upkeep of such homes is simpler than it is for multi-unit properties. When something breaks or requires replacement, you’ll only need to fix one thing instead of several. The management of a single tenant is exponentially easier than wrangling two or more.
2. Purchase a low-cost home. The more house you purchase, the higher your ongoing expenses will be. Many experts recommend starting with a $150,000.00 property. This keeps your mortgage manageable, perhaps even affording you the opportunity to pay a little extra every month with the intent of paying off the mortgage early.
3. Don’t buy a fixer-upper. This may seem a little counter-intuitive to the point just above, however it doesn’t have to be. One can find a decent home in good condition at a low cost – without it being a fixer-upper. It is much wiser to purchase a home that is listed below the market price and make only minor repairs than to try to fix and flip a property when that’s not really your skill set.
4. Location, location, location. The quality of the location you choose will influence the quality of the tenants you attract. Look for things like low property taxes, decent school districts, low crime rates and an area with a growing job market. You’ll also want to look for a strong list of amenities such as parks, shopping centers and restaurants.
5. Work with a property management company. As a new investor, it is easy to be overwhelmed by the myriad of questions, problems and unexpected events that always – ALWAYS – come along with becoming a landlord. You are far better off hiring a professional property management company, and letting them find and interview prospective tenants. They will handle the 2AM phone calls and they know the contractors to call when the furnace breaks down or the washing machine starts leaking.

There are many other factors to consider when thinking about jumping into real estate investment. We would be happy to engage you in a conversation, and, if it makes sense, to work with you as your preferred property manager.

Here are some resources to help you as you consider investing in property:

https://www.investopedia.com/articles/mortgages-real-estate/08/buy-rental-property.asp
https://fitsmallbusiness.com/buying-your-first-rental-property-tips/

“Invest in property”, they said. “Property only increases in value”, they said. “Mailbox money”, they called it. These, and many other golden nuggets of advice represent all the voices in your head as you consider taking the plunge and purchasing your first investment property.

There are many positives to purchasing property with the intent to turn it into a profitable venture. But there are also dangers that must be addressed.  This article will focus on three of the most common areas where money is made (saved) or lost.

Make your Investment Property Work for You

1. Let’s talk taxes

If you’re not careful, property taxes can sneak up and bite you. Every dollar that you have to pay cuts directly into your bottom line. And because taxes are assessed annually and rates change from year to year, they are easily overlooked in the big picture of profit and loss.

When considering an investment property, take into consideration the county in which you purchase. Each county in Colorado determines it’s own tax rate based upon how much revenue they need.  A complete chart of Colorado property tax rates is available here: https://smartasset.com/taxes/colorado-property-tax-calculator

2. The teeter-totter of insurance

Insurance is a must for your rental property - that is a given. What’s not quite as simple is the amount you will pay, and what kind of coverage you will get for that amount. Keep in mind - just like with taxes, every dollar you spend diminishes your bottom line. That said, it’s not always the wisest move to go with the least expensive product.

Especially in real estate, insurance is your safety net in the event of catastrophic occurrences. Right off the bat, you should investigate whether there are any major claims on the property in recent years.  You must also be aware of the possibility of natural disasters.  Is the property in a flood plane? Does the occurrence of hail cause regular damage? All of these factors contribute what amount you will pay for insurance premiums.

It’s of the utmost importance to read your insurance policies for the fine print and details. Know what your policies cover. Know what they will not cover. Know your limits, and choose your deductibles wisely.

3. The value of a professional manager

One of the biggest, and most costly mistakes landlords make is that they believe they can save money by managing their properties themselves. Unless you are a real estate professional, this can be a very expensive decision.

Your time is valuable. That is to say - it has an actual dollar amount attached to it. If you are the one who has to take the call in the middle of the night to repair a broken water pipe, this truth gets very real, very fast. Every time you have to shop for a new appliance, repair a broken fence or issue an eviction to a tenant, you are cutting into the net VALUE of owning investment property.

Professional property managers do all of this and much more, in most cases saving you money and offering you the peace of mind you really desire. Management companies know how to budget for the life cycles of your appliances, exterior maintenance and the myriad of other expenses that come along with investment properties. They find the right tenants, sign the proper documents, and remove any and all problems - all for their regular fee, which is typically accounted for within the negotiated amount of rent that they collect each month.

Oh… and they also keep their fingers on the pulse of the market, and so they can advise you on property taxes and insurance policies as well.

These are just three of the many considerations a landlord must factor into the decision to invest in property to lease. Our recommendation is to consider calling a professional management company as your first step to making sure all future decisions are profitable.  We stand ready to accept your phone call: 720-989-1996 or contact us here.