If you find yourself checking real estate listings during your free time, even though you’re perfectly content in your present home, you probably have the itch to invest in real estate. While full-time and retired workers rent homes to tenants as a part-time investment, others rent out a hefty number of homes as a full-time business. With whichever road you decide to take, the process does not happen overnight. Here are some tips to read up on before beginning a possibly life-changing investment.
- Time. Whether you’re busy with a full-time career, a growing family or a retirement plan, make sure you have the spare time for taking care of another home. Consider how much time goes into the care of your home. How much free time do you actually have and how would you spend it without this extra load? Could you make a trip over to another house in the middle of the day or night if something goes wrong? Could you afford to pay a property manager to do the work for you? Is it worth the time and energy? If you still think it is, you may be perfect for this field.
- Finances. To begin an investment, you either need a bulky amount of cash saved up or a good credit history to take out a loan. Making money doesn’t start overnight. First you need to purchase a home, possibly spend money to fix it up and then wait for someone to buy it from you. You also need to decide what location to buy in. If you purchase a house in another state or you don’t have time to handle situations firsthand, deal in the cost of a property manager to do the work for you.
- Location. Once you decide where you want to make a purchase, find out if there’s a homeowners association in the area. Speaking with them will assure that you are allowed to rent in that area. Laws are different everywhere, but some areas don’t allow a homeowner to rent his or her property to another. Then, check local listings to see what houses in the area are rented out for so you have a price range in mind for your own property.
- Inspections. When you find a house you’re interested in purchasing, you need to put it through a major home inspection. If there’s anything wrong with this house, you want to know before you buy it. Improving the house will come out of your own pocket. Have a professional inspection completed and then inspect it yourself. If improvements are needed, configure in how much they will cost.
- Repairs. Are you handy with tools? Can you easily fix misfortunes around the house? That’s a major plus when it comes to owning multiple homes. Miscellaneous mishaps happen. If you can fix it with a tool box instead of professional help, you can save a lot of money. Perhaps take an educational class on tools of the trade. Your renters will appreciate the easy help, and will possibly expect it.
- Being a Landlord. Begin research on discrimination policies early on so you know what you’re allowed and not allowed to ask possible tenants. When that time comes, be prepared. Make sure to collect recommendations. If they’ve rented before, talk to past renters and learn as much as you legally can. Are they financially secure enough to reliably pay rent? Do you care if they’re bringing pets into the home or if they smoke? Have they ever been evicted? Do they have a long-term job? You want reliable renters in the home that you paid for.
- Customer Service. Practice the best customer service skills that you can offer. If you lose a tenant, you don’t know how long you’ll have to wait before another one comes along. That’s lost money. If you end up evicting someone, you might need an attorney. Evictions go to court, they are costly and they are stressful. The better you get along with your tenants, the longer they will stay.
- Budget. You have tenants living in your house. How much of your income or savings have you put toward this investment? Take into account property taxes, mortgage payments, insurance, utilities, repair and maintenance. If you have a property manager, you should be paying him or her eight to 10 percent of the rental income. If you take this all into account and you are still making a profit, congratulations! You succeeded with your investment.
- Long-Term. You don’t want to give up too fast. Real estate investing is a long, slow process. The beginning period is the hardest. Even if you aren’t making tons of money, maybe fixing up houses is a fun hobby for you. If you enjoy the business, stick with it. It may pay off in the end.
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