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Today I want to talk about thirteen points to having a successful rental property. Let’s jump right into it with number one:
1) Treat your rental like a business…because it is a business.
2) Have a financial reserve in a separate bank account set aside for rental properties. We recommend having three months rental payments in reserve to cover the “unexpected.”
3) Expect the “unexpected.” Something is going to happen at some point, it’s inevitable. Whether it’s a major repair, capital improvement, or a tenant that stops paying rent (job loss, etc.). Something will happen, and if you’re prepared financially, with funds set aside, it will not be a big deal.
4) Savvy real estate investors plan on investing 10-15% of their rental income back into the property each year. Think of it as investing back into your retirement account. Except in this case it’s for upkeep, maintenance, tenant turnover, etc.
5) Plan on maintaining the property and allowing your property manager to keep the property in good repair, looking nice, and up to a good minimum recommended standard.
6) If you have an underlying mortgage, plan on being a month ahead of the rental income. For example, use June’s rental income to pay July’s mortgage payment. Doing this is simply financial common sense.
7) Maintain a good liability rental investment insurance policy, which additionally insures your property manager. Often times you can get discounts by having a property manager.
8) Keep the landscaping simple. If you have flower beds, remove the flowers and lay bark or rock. This will make turnovers much easier and your tenants will thank you for making their lives easier. Remember, less is more!
9) Don’t leave the washer and dryer, unless it’s in an area that requires stackable. You rarely will get more rent, unless it’s an apartment complex. Often times the tenant will have their own. If you provide one, you will need to maintain it, which can be costly.
10) Disconnect emotionally from the property and don’t get too attached to the flowers, or the fact that you may have lived there at some point. Remember, since you decided to turn the property into a rental, it should be treated as a business.
11) Allow your property manager to manage the property. Keep an arm’s-length relationship with your property and allow the professional you hired to make day-to-day decisions on your behalf. An owner that manages the property and tenant by telling the property manager what to do, is most always a recipe for a failed management strategy.
12) Be ok with not knowing all the details. Since you treat it as a business, know the key financial and performance metrics. Leave the rest to your property manager to handle.
13) Remember that since your property is being professionally managed, it is subject to Fair Housing and other laws.
We believe that if you follow these thirteen points, and these principles, that the likelihood of your rental being successful is far greater than if you don’t.