5 Ways to Ensure Rental Property Ownership Doesn’t Stretch You Too Thin
Property ownership is among the best ways to generate long-term wealth. The consistent rental income stream, increases in property value, and tax advantages all reveal why buying and holding is so popular among people from all walks of life.
However, if you purchase a rental property without thorough consideration, your ideal investment could quickly turn into a financially draining nightmare. From middle-of-the-night repair calls to surprise vacancies, being a property owner can be a stressful ordeal.
One reason many investment property owners hire property management firms is to make the process less stressful. So, if you buy an apartment building in Houston, it’s a good idea to find a Houston apartment management firm that can help you maximize your investment potential.
With so much on the go, the last thing you want is to burn the candle at both ends. Consider these five ways to ensure your rental property investment doesn’t burn you out.
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1. Create a Realistic Budget and Emergency Fund
One of the greatest pitfalls is failing to keep track of expenses. While it’s easy to assume that the rent will cover the mortgage, property tax, and insurance, other costs could materialize. For instance, the water heater can break down, tenants might default on rent, and tenants could bolt. Setting a realistic budget can help you stay on top of things and remain financially flexible.
A rough guideline is to budget 20%–30% of your rent income for non-basic items. It’s also beneficial to start an emergency account so you don’t worry when something bad happens.
2. Screen Tenants Thoroughly
The renters who occupy your rental units will determine whether property ownership is a dream or a nightmare. Bad tenants can lead to rent being late, damage to your rental units, trouble for other tenants, and other types of problems.
A property manager can reduce risk by checking credit reports, requesting reference letters from previous landlords, checking employment history and income, and running criminal record checks. Conducting a thorough screening will increase the odds of you getting quality tenants.
3. Hire a Property Manager
One of the decisions landlords are accustomed to making is whether to handle their property and tenants personally or to employ a rental property manager.
Even if you only have a single rental property in close proximity to you, working with a property manager can be a game-changer. You won’t have to do it all alone and will have someone who can answer questions, give advice, and help you make sound decisions.
4. Stay Organized with Technology and Systems
Most landlords run afoul simply because they do not have adequate systems in place. Trying to handle tenant selection, rent collection, maintenance requests, and lease renewals using stick-on notes and spreadsheets will quickly overwhelm you.
Again, a property manager can be invaluable, since they will have processes and procedures in place to help customers.
5. Know Your Limits and Invest at Your Comfort Level
It’s never a good idea to bite off more than you can chew. So, buying a rental property at a price point you can’t really afford is a mistake. It’s also inadvisable to get into the investment property space if you’re drowning in consumer debt. You must ask yourself questions like the following:
Do I have enough financial buffers to absorb vacancies?
Do I have the resources and time to manage a property and tenants?
Should I outsource landlording to a property manager?
Building at a deliberate speed will help you learn through experience, build financial stability, and avoid burnout. Real estate is a long-term strategy, and slow and steady usually wins out over fast and furious. Rental property ownership is one of the greatest wealth-building tools out there, but it’s by no means challenge-free.
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