|
2. Failing to do the homework.
Your work as an investor should include much, much more
than just an inspection of the property, although inspection
is essential. You also need to conduct a thorough investigation
of your area's current rental market. What are the vacancy
rates and average rents for units similar to yours?
What is the average age of the rental housing “stock”?
How is the neighborhood zoned? What are the government
regulations about rental properties? Has City Hall approved
new rental complexes nearby? Investigating and answering
questions like these will ensure that you are equipped
with the necessary information to be a conscientious
investor.
3. Not leaving ample room for
improvements. As a rule, triple your budget and
double your time when preparing a rental unit for lease.
Allow for an extra cushion in your expenses and your
calendar.
4. Believing everything you see
on TV. The low rates advertised on television and
radio spots are generally for owner-occupied homes.
Lenders consider an investment property to be riskier,
so you should expect to pay more in points and interest
rates. Expect roughly 1.5 points or half a percent extra.
The lending criteria also will be higher. While a flawless
credit report isn’t necessary, bad or no credit won’t
get you the loan, and you’ll be extremely unlikely to
get low- or zero-down-payment offers at any credit score.
5. Lowering standards for tenants.
The prospect of a tenant with cash in hand who wants
to move in now can be tempting to a new landlord. Hill
strongly advises against these quick deals. Require
an application, a credit check, and employment and rental
history before you take a cent from a prospective renter.
Getting burned by a bad tenant is much more costly than
having a unit sit vacant for a couple of months.
6. Having double standards.
Adhering to your rental policies should not be optional.
If you start waiving, ignoring, or even finding little
loopholes in your own policies, you’re headed for trouble.
For example, if you have a “no pets” policy, stick to
it, and don't ever let someone move in without a security
deposit or allow late fees to accrue.
7. Investing from afar. Long-distance
relationships will put a strain on your pocketbook.
Unless your rental property is in a location that you
visit often enough to manage it and make repairs easily,
keep your rental properties close to home.
8. Getting a bad deal. Real
estate investing is not for the timid; don’t be ashamed
to make a low offer. You’re trying to make money, remember?
Rental property owners generally base rents on a multiple
of 100; if you pay $100,000 for a unit, you need to
collect at least $1,000 a month in rent to pay the bills
and make a decent profit. A well-prepared investor will
have done enough research to know what his rental market
will bear.
9. Not keeping up with the Jones’s.
Why does the property across the street from yours rent
the same day someone moves out while yours sits vacant
for months? A prudent investor will know how he compares
to the competition, and be able to say whether his competitors
have lower renter standards, lower rent, or better amenities.
10. Not covering your assets.
Responsibly insuring a rental property means more
than a policy covering acts of God. Look into, and obtain,
coverage for liability in the event that you are targeted
with a lawsuit. If a loose railing results in a tenant's
child falling off of a balcony, or there is a burglary
that a tenant blames on the lack of security alarms,
you’ll be glad for the extra coverage.
I would sincerely like to help
you with all your real estate needs. My extensive knowledge
of real estate investing, 1031 exchanges, quality of
home construction can save you thousands of dollars
when buying a home and dozens of hours looking for the
wrong home. Please do not hesitate to give me a call.
More FREE real estate reports
|
