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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