Investing can be a wonderful tool to give you passive income and build your wealth.
Investing in rental properties is one option for investing. It is not necessarily the easiest or safest path, though, and it is definitely not for everyone.
After being in real estate for several years, I finally took the plunge and purchased a rental property.
I wrote in another post about why I bought a rental property, and I wanted to give you all something more on the topic. What better way than to interview a property manager and get her perspective on things?
My hope is that after reading this you have a better idea of if you want to invest in a rental property and some things to consider when getting started.
Well, let’s dive right in!
Q: How many years of experience do you have in Real Estate/Property Management?
A: 16 years
Q: What is the typical rate you charge for managing properties?
A: The rates are negotiable and may variables go into those negotiations. It would be difficult to give a rate without knowing exactly what I am being commissioned to do, however typically it starts at 10% of the monthly rent.
Q: What do you estimate is the eviction rate based on the percentage of properties you manage?
A: Less than 3% eviction rate on my managed properties.
Q: What is the biggest mistake you see property owners make?
A: Managing with their heart. You must treat all clients the same regardless of circumstances. Not only as a good business practice but also to be sure that you do not create any fair housing issues.
Q: What is the biggest challenge of owning and managing rental properties?
A: If you are investing, the biggest challenge is budgeting appropriately for repairs.
If you are managing, then you always want to be sure you choose quality over quantity. I would rather have 4 months of vacancy loss rather than rushing to put a resident in there and having 4 months of a resident who is not paying. Then you have to pay an attorney for the eviction and you miss out on the rent while you rehab the unit to make it rentable again.
Q: What do you look for in a potential rental property?
A: I look at the cap rate, neighborhood, style of home (ranch homes are generally some of the best investments because you don’t have to worry about maintaining an upper level), what it will take to rehab or whether or not it is already rented and drawing in an income consistently.
Q: What are some tips/trick to get resident to pay on time?
A: Be consistent! 3 day notices must go out immediately on the 1st day rent is late so you are always in a position to take the next step if you must. I send notice even if I agree to a payment arrangement because if they default on it I don’t want to have to give them more time than what was agreed on.
Q: What are your thought on pets in rentals?
A: I think accepting pets is ok but only mature animals with excellent landlord references . I also recommend a refundable pet deposit and monthly pet rent. This way if damages are done you have the security deposit plus the pet deposit along with the pet rent you collected monthly during the duration of the lease.
Q: How do you handle residents who want to negotiate on price?
A: There are many factors that are involved in negotiations. If I negotiate price it is mainly because I have an extended lease or it has been on the market for a while and it seems to be the consensus of the prospects that they would rent if the price was somewhat lower. I always speak with the owner prior to any negotiations, as well as do another market analysis to see if the proposed price is realistic for the market.
Q: What is the biggest potential tenant turn off?
A: Someone who is in a rush to move in before references can be checked or without giving notice to their current management company. Also, unreported items on the credit report that go unmentioned (ex: you have given me your present address but when I pull your credit report your current address is listed as an address that you did not mention on your application as current or past. This strikes me as dishonesty and suggests I may need to look further into why the address was unmentioned.) Land lord verifications are extremely important to me.
These are some of the basic questions I feel are relevant to know and think about before taking the plunge and investing in rental properties. Whether you plan to manage them yourself or hire someone else, you will need to be aware of this information as you are ultimately in charge of what happens to your property.
Not sure where to get started with buying your first rental property? Let me help you take that first step to your best investment yet! Check out the details here!
Do you have other questions about rental properties and property management? Leave them in the comments below and I will do my best to find the answers for you!