Landlord. This single word can cause people to go into “heart attack mode”…
The majority of people when asked would respond by saying “I did not grow up wanting to be a Landlord. Toilet, termites, tenants and trash are not very appealing”.
But the fact is that for real estate investors we may end up being a landlord…but with a little education, patience and by applying common sense this role can be very rewarding.
I purchased my first investment property over twenty five years ago when my mother suggested that I needed to own an income producing property. It was a little fixer upper that only needed paint and a few minor cosmetic repairs. Within a couple weeks I was receiving rent checks. This seemed to be working well so I purchased another property.
It was several years before I actually realized that purchasing and renting was more than just interviewing tenants and collecting rent. It was about the long term investment as a means to create wealth.
Greg Pinneo talks about investing for the long term and not merely speculating on a quick profit…and that was the part I was missing at first. I was not paying for the property…the tenant was paying the mortgage, taxes and insurance each month. The mortgage would be paid off in a matter of years and then would then be a free and clear asset that was still generating income.
As we are looking at properties that will be sold or marketed to others, we will find some excellent candidates to purchase and hold long term.
Let’s look at some useful tips on finding good rental properties.
1. Look for a property for a bargain price that is in a good area. Check rent rates and also check to see what the local vacancy rate is in that area.
2. Look for a property where you can increase the positive cash flow and increase the value of the property. Adding new appliances, a washer drier connection, cosmetic painting, instant landscaping and minor upgrades pay off with higher rent.
3. Look for multi-family properties. Usually only a portion of the property has to be rented to pay the monthly debt service.
4. Look for property near shopping, schools, recreation, neighborhood parks or other areas people like to go.
5. Think long term.
6. Think highest and best use. Apartment buildings used as residential rentals now then converted into condos or senior housing for aging baby boomers. Houses or a duplex converted into commercial office space to bring higher rent.
The possibilities for rental properties are endless if we can get over the fear of the “landlord” word. Locating good properties will insure that you attract a better quality tenant and that you will have a property that will continue to increase in value over the years.
Good rental investment properties will build your long term wealth and good tenants will make your journey to wealth a good one.