Found a good property, this is my very first rental and I just started into the rental property game and would like any suggestions/pointers/mistakes to avoid/etc. Unfortunately I will have to start out with traditional home loans instead of paying cash for the properties. Any advice is welcomed and thank you in advance for your time.
I'm fairly new to investing as well but I've had a rental for about a year and a half now.
-When looking into prospective tenants, charge a non-refundable fee with their rental application. I charge ~$30/person. If someone is serious about renting the property then they will pay the fee. I use this to run a background/credit/criminal check. And always check the tenant's references for past rental history as well as current employment.
-Have a solid lease ready to go, one that addresses potential issues that may (or may not) come up. Issues will come up, it is better to have them spelled out before hand. I'm glad I spent some extra time on mine already!
-Set aside a portion of rent every month that will go towards repairs and maintenance. This way when your tenant calls you to fix something you have the cash ready and at least the money side of the headache is a non-issue. I use $1 per sq ft per year as a rule of thumb, theoretically this should build up so when you need to replace the roof (or another big ticket item) you have the cash to do so. My rental house is older (built in the 50s/60s) and I may start setting aside even more for repairs.
-Always run the numbers with higher than expected expenses, if you are not cash flow positive find another property. There is always another house, don't get attached to any one property and regret it later.
-Someone told me this and it worked well for me thus far. Charge slightly higher rent than what is normal for the area. You tend to get better tenants that will take better care of the property this way.
There is a lot more advice I could give but part of it is just getting in there are figuring it out for yourself! Let me know if you have specific questions and I'll be happy to let you know what I know. Best of luck!
@Eric Schneider I'm a newbie here too so, while I don't have any real advice to give - I'm excited for you! Keep us posted on how it's going. Get enough sleep to work with a clear head on. (Advice to myself as well)
There is nothing wrong with utilizing a conventional home loan for a property like this - if you can secure one. Most banks are weary of lending to investors with the newly implemented protocol associated with the crash in the housing market. Nonetheless, if you can leverage a property when the numbers are good, it makes all the more sense to keep more money in your pocket to use for an additional deal.
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