Tips For owning a Rental Property
There are a lot of things to keep in mind when you buy your first rental property. Things such as tracking taxes, finding suitable tenants, having capital to fix any problem that pops up, etc. Yes, financially, rental properties can be very profitable in the long-term, but it’s important to learn all you can about the in’s and out’s even if you must ask an agent or broker with experience.
Keeping track of all expenses and income is crucial when tax time comes around. Create a spreadsheet or find a template of one to keep a very detailed list of all that pertinent information.
A list of things you want to always track:
Purchase price of the property you’re renting
Accumulated depreciation and current annual depreciation on the property
Security deposits received
Expenses to track
Commissions or property management fees
Cleaning, maintenance and repair costs
Real estate taxes and mortgage interest rates
Security deposits returned to tenants
Having this information saved in a spreadsheet or application will make it easily available at your fingers whenever you need them for your accountant etc. This enables you to have accurate records always available.
Finding the right tenants
It sounds so simple in theory, but you should screen your potential clients diligently, or you could be in for a real estate horror story. Never go long periods of time without checking in on the property, whether it be once every two weeks, once a month, etc. it is important to show you’ll be actively checking the condition of the home to prevent the renters from destroying any of the property. When you find the right tenants, it’s worth giving them a deal on the rent and not increasing, because you know they will require less repairs, leave merely no mess and will always clean up after themselves. The lack of increase in the rent may seem bad, but you’ll realize the comfort of knowing it’s clean and in good shape, outweighs the potential rent increase.
Repair costs to worry about
If renters damage the walls you’ll need to pay for spackle, drywall, paint, etc. This can be costly if there’s a lot of damage. Also, there can be bigger issues such as an appliance breaking while the renter is in the property and you may be obligated to fix it if that’s in your lease. If the carpets are stained you may need to get new carpeting which can always be expensive as well. The important lesson here is to set aside a cushion fund for fixes on the properties. If you should continue to dig into your monthly profits to fix the home, you could lose a great amount of profit. If you’re proactive though, you can act on some things that will potentially need fixing soon and get it repaired prior to renters moving in.
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