The 3 Biggest Mistakes In Property Investing
These errors cause investors thousands of dollars and countless hours of stress.
Error 1 is Price Shopping.
Going with the cheapest solution to get and manage your property will get you the cheapest result. Value is getting the most bang for your buck from your investment dollar. Many investors start out planning to get a large cash flow by acquiring the least expensive home the can find and by doing the management themselves, part time.
After about six months of trying to invent an accounting system using a generic spreadsheet software, learning boiler zone valve repair at night after their regular job, and discovering they are in sales and marketing, they start shopping for someone to fill their vacancies and for goodness sake get that problem tenant out before cash flow becomes a serious problem.
Two or three frantic calls to companies found on a quick internet search and they pick the cheapest. It took five minutes to find a property manager.
Problem solved? They’ve got a 30 year mortgage on a vacant rental property and they just hired the property manager with the worst occupancy rate and highest maintenance bills in the market. A rental property is a business, not a hobby. Hope is not a business strategy.
Make sure you have a realistic plan for selecting a property that meets your specific situation. The cheapest fixer’ upper’ may be a great choice for a general contractor with some spare time and spare cash.
The more expensive duplex with established tenants may fit better for someone with limited cash reserves. Make sure you have a plan for marketing, managing, and maintaining your business. If you’re an accountant you can save money doing your own books. If you are handy with tools you can save on repairs. If you don’t work a lot of overtime at your regular job you can handle routine administrative tasks.
Few people have the time and skills to do it all. Even fewer want to be on call 24/7. Call and talk with an experienced property manager for a commitment free personal assessment of the market as it relates to your specific situation.
Error 2 is waiting. Waiting for lower interest rates. Waiting for prices to come down. Waiting for a larger down payment. Rental property is a long term investment. Experienced investors value a rental property based on how much rent it brings in compared to the cost of the mortgage, maintenance, and management.
The sale price of the property is secondary. If you can make money on the property today, then why wait until tomorrow? The next phase of waiting is waiting to run your investment like a business. Do not simply throw money at a vacant rental’s mortgage month after month.
Do not wait until the major repair to start tracking (and budgeting) expenses. Don’t wait until you are behind on payments to ask for help. Call us today. We are happy to share and discuss our 6 pillars of tenant management with you. (screening, deposits, expectations, pay or vacate, late fee, collections).
Error 3 is not interviewing a property manager. Property management is like weight loss in that the concept is simple, but the practice requires dedication and discipline. If you want to lose weight you just have to eat less and exercise more. Easy to say, sometimes more difficult to do than we like to admit.
A good property manager is happy to share “the secrets” of the business. Even if we never have you as a client, we benefit from an improved market. If you are just starting to consider purchasing an investment property, or managed several for years, invest in some professional development.
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