What to know before you Invest in Real Estate

What to know before you Invest in Real Estate

While investing in real estate is a good way to help your money grow. Here are 10 things you should know before investing in real estate:

  1. Beware of Taxes – Yes, there are tax exemptions for your first, and primary residence, however, any investment properties do not qualify for this exemption.  Because of this, you may want to tack a little extra onto what you were planning on charging for rent to cover the higher property taxes.
  2. Visit any property you own frequently. We would suggest every few months. Not all renters will contact you if problems arise – because of the fear of getting evicted or rent being raised. If you are visiting the property often, this will help you avoid any serious damage to the home. If you can’t make it out to the property for whatever reason, I would seriously consider hiring a rent management company to monitor your home for you. This will help ensure you are sustaining the least amount of damage possible.
  3. Find good renters to start with. Finding good renters can be tough, but if you find someone who is willing to take care of the home – and take pride in it, as if it was their own – hold onto them. You may even want to consider not raising the rent to keep them in the home as long as possible.
  4. Save some rent each month for repairs. It doesn’t have to be a lot, but repairs are often unexpected and expensive. Replacing a water heater, for example, can be a few hundred, if not thousands of dollars. Setting aside $50 or so of your monthly rental income can really add up and help you out in the long run. Of course, keep in mind, that renters, especially if they were the cause of damage that led to repairs or replacement being necessary, should help pay.
  5. Set Rules and stick to them. Sometimes it can be hard to not let a late payment slip in every once in a while, but the more often this happens, the more likely it will be to continue happening.  Let your tenants know there are penalties for damages, or failing to pay utilities or rent on time.
  6. Keep rent low. It seems to go against the grain, but keeping your rents low will ensure you have 100% occupancy 100% of the time.  This is essential when you have multiple rental properties. Any space without a tenant will cost you more than renting to someone for a little cheaper than maybe you’d like.
  7. Choose a property that you can manage. if you aren’t sure what you can manage, take a look at your finances and the property you want to manage. Decide how much you can charge, and how much this specific property will cost you. Is it worth it? If not, this doesn’t mean you shouldn’t invest – you just may want to find something that fits your budget a little better or you may want to search out a rental management company, such as the Bay Management Group Philadelphia that specializes in Philadelphia Property Management , especially if you are purchasing a property on the east coast. Whether it is a smaller space that is easier to upgrade and repair, or just buying less house than you can afford.  You don’t want to get in over your head right away. If you feel you can maybe manage a larger property, later on, go for it.
  8. Get a contractor account at the store you most frequent for repairs and items for your rentals. Not only will this help you save money, but it is relatively easy to get and it is free to register with most stores as a contractor.
  9. If necessary, say no!  This may be our most important piece of advice for you. Tenants will want things that go against your gut way of managing properties – you have the right as the owner of the property to just say no, and we recommend doing it from time to time. Of course, saying yes to a tenant who wants to upgrade your home could be good from time to time, but be very clear that any updates made, will stay with/in the home even when the renter is gone. Just be aware of what you are getting yourself into and be cautious.
  10. Be intentional. If you have more than one rental property, use the same paint colors, carpet or wood on all surfaces.  This will help when repairs or touch up is needed. Avoid carpeting the entire place, as carpet will need to be repaired, cleaned and replaced more often. Another way to be intentional is to do all repairs you are able to do on your own. Don’t do it if you have no knowledge becuase this could cause more problems than solve.

 

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