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Avoid the Seven Most Common Profit Killers in Investment Properties

Rental property can be an excellent investment property, but only if you do your research ahead of time and know how to avoid some of the most common mistakes that can impact your bottom line.

1. One of the most common, and costly mistakes that investors can make is holding out for what they perceive to be the best deal. While you might think your rental property is worth a certain amount each month in the current market, you can really do your bottom line harm if you hold out waiting for a tenant who is willing to pay a slightly higher amount. You must stop and ask yourself whether it is worth it to hold out when you will be stuck making that mortgage payment every month for just a marginally higher amount on the rent. Ultimately, you may be better off to go ahead and rent it at a price that is fair for the market. Not only will you have a tenant in the property faster, but you may also be able to maintain the tenant longer and attract a tenant who will care for the property better.

2. How many times have you put off handling repairs around the property? Keep in mind that the rental market is really hot right now. As a result, tenants can actually afford to be somewhat choosy when it comes to selecting the properties they will rent. For investors this means that if you wait on repairs it could cost you the ability to attract high quality tenants. Simply put, putting off repairs means that the property is likely only going to attract tenants who are not concerned with what the property looks like and this will carry over into how they care for the property after they move in. While you very well may be able to rent the property even without making the repairs, it may not necessarily be to the tenant that you want. In the end, it is typically better to go ahead and make the repairs; saving yourself time, headaches and more expense in the end.

3. Marketing is crucial for rental properties today. You could probably get by with just running a simple ad in the classifieds section, but if you are looking for high quality tenants your best bet is to move your marketing campaign online. Also, focus on develop an ad that is well-written.

4. Using a leasing agent can provide you with numerous advantages, but only if the agent is experienced. If they do not have the right combination of experience, the result could really cost you in the end. Remember that not every agent is the right agent to handle the leasing of your property. Look for someone who specifically has experience in advertising, tenant screening and reviewing applications.

5. Have you found yourself facing eviction after eviction because the tenants didn't work out? The problem probably lies in either no screening or poor screening. The same is also true for excessive property repairs as well. You absolutely must do some research first and screen tenants rather than relying upon your first impression. This is not an area where you can afford to be trusting.

6. It is critical to be sure that you use an appropriate lease agreement. Far too frequently; however, landlords tend to use a lease agreement that is quite generic. The reason for this is often that they do not want to scare prospective tenants. Unfortunately, such a lease leaves you as the landlord open to numerous problems. Remember that if a tenant refuses to sign a lease agreement because of certain clauses then they are probably not the type of tenant you want in your investment property in the first place. The lease agreement is meant to protect you. Without a lease agreement that does its job, you will likely find yourself facing problems.

7. One of the most common mistakes that many new investors make is leaving their property vacant. This is a mistake that you usually cannot afford to make. Be sure you know how much it will cost you each day that your property sits vacant. For example, if your property rents for $1,200 per month, then each day that it sits vacant, that's $40 that you have lost. You might not think you can afford to pay for that advertisement or hire a professional property manager, but when you consider how much you could be losing if you do not take those steps, it suddenly takes on an entirely new perspective.



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