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Is Landlording is Right For You: What it Takes So you own your home and your thinking of an investment property. Now this is not just real estate but a small business needing attention and good management skills. Owning your home is one thing, landlording is quite another. True its about getting the roof fixed, insurance agents, refi's property taxes, things you've done before but thats where it ends. Lets take a look at what it really takes: The running of a real estate based small business. Lets look at investment property as an asset class to seeing if you have the skills it will take to do well. What are some of the characteristics of investment property. Did you ever notice that rental property is often cheaper per square foot than a home. Thats because it requires risk and management skills that make it less attractive to many people. Lets try to break it down so that you can assess your own skills and see if its the right move for you. Capital: 1. Normal wear and tear: Things like carpets, floors, paint and window coverings are often repaired or replaced. Count on having money available to keep your property looking fresh so that it rents quickly 2. Tenant Damage: Dont think that the security deposit will always protect you. Very often security deposit limits will not cover major damage done by pets or malicious tenants 3. Capital Improvements: Investment properties are big and so carpets for hallways, fire doors and security systems, roofs and siding or paint will cost tens of thousands of dollars. Will you have the personal ability or the equity to handle this without a big unexpected debt burden. 4. Financial Strength: Think carefully about your financial ability to handle an unexpected problem. After the cost of buying, a big down, closing costs and insurance you may be tapped out. If you have a major expense and have to borrow, will you now have to carry the property out of your own pocket. Can you carry this and how long are you willing to? 5. Investment Time Line: There is more investment risk with a short time lines. Your investment could easily lose value in the short term, particularly if you've bought recently since the overheated market has cooled. Although this has been good for rentals you may have less equity to fall back on. 6. Vacancies: Few properties can count on being fully occupied. Expect a 10% vacancy rate or more. That means you will have less than 10% cash flow at any given time and you will have to cover all expenses until its rented. Investment Skills: 1. Buy Low: Do you have the discipline to wait out the market until the right investment choice comes your way. 2. Do you understand finance well enough to buy smartly. You may want to read to understand how professionals evaluate property for investment purposes and Pricing Fair Value for larger Properties Management Skills: 1. Marketing: You need to research your market, to understand the properties potential and price your rental so that it will rent fast and at the right price. 2. Advertising: Where and how effectively you target your market and use the mediums that your most probable renters would read so you spend advertising dollars efficiently 3. Sales Skills: You need to present your unit in the best light to entice and engage. be aggressive and ask for the application and ask for the check. 4. People Skills: You are in the lives of all your tenants and their quirks. Not fun and not easy. You have to be able to manage all types because management is all about solving problems and some tenants have no humor. 5. Discipline: Get a set of tenant screening guidelines and stick to it. Liking the person who isnt qualified is no reason to rent to them Business Management Skills: 1. Keeping good tenant files will help you win your case 2. Property management software: have basic computer skills to keep your files updated easily 3. Run your property as if its your family business 4. Understand taxes and depreciation to maximize your gains REsourced from www.yourpropertypath.com You may republish this article, as long as you do not edit and you agree to preserve all links to the author and www.yourpropertypath.com
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