5 tips for your first rental property
I do not know about you, but I am being bombarded with ways to make money. I have never heard the phrase “multiple streams of income” so much before in my life. I have to balance between my desire to make money in more ways than one with my goal of enjoying the mundane and being content with what I have. I have come to a place where I am just trying to enjoy my life and be happy. Happiness is extremely objective, but according to Morgan Houssel in the Psychology of Money, happiness comes from the ability to control one’s time. For me to better control my time, I would like to build multiple streams of income that require work that I can enjoy and be proud of.
In order to do that, I think rental income is work that will feel most authentic to me. After speaking with my dad about his journey with many successes and mistakes, I have compiled a list of five tips to adhere to when dealing with and purchasing your first rental property! These tips will not prevent you from making mistakes. Which is good because without making any mistakes:
Are we really learning?
Are we really taking enough risk?
These tips will hopefully help you in making less costly mistakes and will help you in deciding when to pull out if things are not going well.
Five Tips for your 1st Investment Property
My money making me money = Good investment
This first one is less of a tip and more of a fact. If your money is making you money, then that is a good investment. If your money is making you lose money, that is not a good investment. Anyone can invest in the stock market, but that does not mean that everyone who does is making money. Your first investment property will be a large purchase. Do your research before purchasing! Here are some questions you can ask yourself to see if this investment is worth your cash and time:
Renting to long term tenants:
Is it near public transportation and schools?
How much is my mortgage in comparison to how much rent goes for in this area?
Renting to vacationers:
Is this property in a central location? (close to tourist attractions, public transportation, etc.)
How much am I willing to invest in upgrades to make the place appealing to visitors?
Fix the place in the beginning
The last thing you want to happen is a leaky roof caving in and now you have to put tenants in a hotel and get emergency repairs. Emergency repairs are costly. It could also be as simple as a toilet that is older and wastes way more water than a different kind of toilet. A light bulb that consumes more power than the LED lightbulbs that are known to use up to 90% less energy and last longer. You do not need to make unnecessary repairs that lead you to wasting money. Like changing all the cabinets to soft close cabinets. Make the repairs that will save you money in the long run. Some changes would be aesthetically pleasing to the eye, but not so much to your pockets. You also run the very real risk of people damaging your items from lack of care.
Keep learning
Keep learning is a motto for life. Perfecting something comes from repetition and learning daily. Being a lifelong learner prevents you from losing money, losing tenants, and losing your sanity. You can take property management courses that are tailored to the city/state/country you would be servicing. You can read blogs like this one or you can watch YouTube videos about people renovating properties and purchasing their first one. Also look into networking on Facebook, Pinterest, and in person at conferences in your area. You learn the most by talking with people so you can ask your questions and answer some of theirs too. Learning from one another is a skill, so practice it.
Watch your plumber and repair folks
Have you every hired a plumber or had to call maintenance over to your apartment? I have, and I can tell you that I never pay attention to what they do. I go off to my computer and television occupying myself elsewhere. You may want to start paying attention. One time, the toilet in my friend’s apartment was running for weeks. She did not know how to get it to stop making that rushing noise. I jiggled the handle a few times, and it stopped. She was amazed. I had learned that trick from my dad. Not every issue is so large and costly that you need to hire someone to fix it. Watch what your repair person is doing next time. The actual job might have only taken the person five minutes to fix. Observing the work of the maintenance folks around you will certainly pay off in the long run. Whether for your rental property or for your own home!
Put together a crew
I immediately think of that episode of Family Guy where they are doing a spoof of famous Hollywood directors and they mention Michael Bay movies always involve putting together a solid, trustworthy crew! Like a good group of friends or that coworker you can always depend on, you need a crew in the rental property business. This could be working with a property management company, calling your friend who own their own construction business, or you learning the tricks of the trade with a few other people. You can run a business with just you doing all of the work, but you will find that your time is stretched. What you thought would be a fun source of income has become a full time job that is your only source of income. If you want the rental business to be your primary source, then you and one other person can definitely get the job done. However, you can only do part of the job. You need an accountant to help with taxes and write offs, a lawyer when you get sued (it’s a high chance of that happening), etc. You may be able to learn how to stop the toilet from running, but you will at some point need someone who is skilled in repairs.
Running a rental income business is about being forward thinking. Anticipating issues before they happen, and having the understanding that you do not and cannot know everything. Set aside money for the people you need to help you through this journey. I know for myself, I plan on signing up with a legal site to help with any future issues. I want to have support mechanisms in place before a situation happens, not as it is happening. Plan for war in times of peace my friends!
What are some tips you have for first time investment property owners?
