No matter how long you’ve invested in real estate, it’s a tough job. Being a profitable investor requires time, money, patience, and plenty of commitment to being a landlord.
As a landlord, you have many tasks that can’t be pushed to the wayside without legal consequences. You must show your units, prepare them for move-in, perform inspections, manage security deposits, collect rent, and deal with tenant issues. That’s on top of maintaining the property and performing periodic repairs.
After all these tasks, you might wonder if owning rental property is worth your time. Truth be told, for many, it’s not. However, when you’re committed to property investing, there are plenty of ways to stay profitable without being overwhelmed.
1. Contract with a property management company
Most property investors don’t enjoy being landlords. The day-to-day duties are overwhelming and stressful, and you might get sued if you do anything wrong. The best way to avoid the pitfalls of landlording is to hire a property manager.
With a property manager, you won’t have to be the landlord; they’ll take care of everything while adhering to local and state landlord-tenant laws. A professional service will provide you with a team of experts who are knowledgeable of the law.
For instance, according to Texas law, Green Residential helps Houston property investors manage their properties.
If you’re not an experienced expert in property management, it’s a wise move to hire someone who meets those qualifications.
2. Plan your investment strategy
Do you have a property investment business plan? If not, you need one. Every business needs a plan as a foundation, especially when working with expensive investments like property.
Your investment plan will help you outline important information like:
· How much money you’re able to invest
· How much money can you use to reinvest
· Your budget for creating a smart home (if that’s what you’d like to create)
· How much time do you have to work on your investments
· The skills you currently have
· The skills you need to acquire
· And more
You really don’t want to wing it with real estate. It’s a bad idea for several reasons. The biggest reason is that it’s easy to make rookie mistakes, but a plan can help you avoid those mistakes by keeping you on track. You’ll be in a better position if you work with an experienced investor to create your plan.
A plan can help you stay right with the law
Investing in real estate can get confusing where landlord-tenant laws are concerned. Do you know how to hold and manage security deposits under different circumstances? Do you know when you can serve an eviction notice, how to write and deliver the notice to quit, and what timeframes apply to each reason?
There is nothing easy about landlord-tenant law. If you don’t have a written plan for running your investment business, you’ll make mistakes that can cost you plenty. For instance, if you evict a tenant incorrectly by giving them improper notice, your lawsuit can be thrown out. If you do something egregious, the court might rule in your tenant’s favor, and then you’ll be stuck with them.
3. Choose properties carefully
It’s mostly new investors who struggle with choosing the right properties. Not all properties have the same profitability potential. You’ll need to crunch many numbers to find out if a property is worth buying. It all depends on the cost of the property, your mortgage payment, how much money you’ll need to spend on repairs, and how much rent you can collect.
Most properties aren’t going to net you more than a few hundred dollars in profit before the mortgage is paid off. However, once you pay off the mortgage, the profitability varies greatly between properties. Some might not require much upkeep, but you won’t generate high rents. Other properties might generate more rent, but the upkeep will be expensive.
If making investing easy is a priority, choose the properties that won’t take much work to rehab and maintain. You can always hire out the work, but you’ll still need to manage more responsibilities than you may realize.
If you cannot make monthly payments, explore a Reverse Mortgage:
Instead of making payments, the reverse mortgage loan balance grows over time and is repaid when the borrower sells the home, moves out, or passes away. This feature makes reverse mortgages ideal for homeowners who are on a fixed income, as they can access the funds, they have built up in their homes without the burden of making regular payments. This can provide much-needed financial relief and stability, allowing seniors to maintain their standard of living and enjoy their retirement years.
Real estate is a long-term strategy
Ultimately, real estate is a long-term strategy designed to build wealth. It’s not going to net you massive profits in the short term. If you want to develop a profitable investment business, always keep the long-term in the back of your mind.
Patience and planning are equally critical for owning successful investments.
