If you were to speak to most landlords about managing rental properties, there are 5 things that will always be mentioned.
These are known as the pillars of managing a rental property and are applicable everywhere, no matter where you are in the world. If you can understand each pillar and how it can benefit you, you will go a long way toward becoming a successful homeowner.
This article will explore these pillars in more detail.
It is impossible to ignore this pillar. Unless you are already a multimillionaire many times over and can pay cash, you will have a mortgage on your rental property. As a result, the amount of money you pay to the bank will depend on the interest rate. You must be sure that you will be able to deal with a variety of interest rate levels before choosing to invest in a property. Of course, there is always the risk that other things will go wrong, which could cause you to default. You can never predict life events. However, you should also do everything you can to minimize risk by using what you know.
You never know if you are going to have a good or bad tenant. Either way, tenants generally don’t treat a rental property like it’s their own home. There is always a level of negligence that occurs. You must be prepared to cover any costs resulting from such negligence. In addition, it will also be necessary to carry out repairs as a direct result of the aging of the house. You can be sure that the tenant will point you to the things that need to be fixed. It is in your interest to keep the property in good condition, as a dissatisfied tenant will only mean they leave and this can hurt your cash flow.
You never know what can happen to your rental property. Depending on where you live, you may be in an area prone to extreme weather conditions like hurricanes and monsoons or abnormal events like earthquakes. There may also be a fire on your property. Also, your tenant could be in a serious accident or even die, you just never know. The only thing you can do is get comprehensive insurance for your property. This is important for successful rental property management.
Do not forget to pay them every year, otherwise you will have to deal with the government authorities. It is certainly more convenient to search for more rental properties rather than dealing with unpaid taxes.
Last but not least, the occupancy rate is vital for a profitable rental property. If your property is vacant most of the time, you will almost certainly experience a cash flow problem that could lead to default. To attract more tenants, you may want to do a couple of things:
– lower the rent
– make improvements to the property
Either way, the market may sometimes not be in your favor. Sometimes there is a surplus of properties on the rental market, while at other times there is a shortage. All you can do is make sure you are equipped to handle both situations.
By following the 5 Pillars of Successful Rental Property Management explained above, you are well on your way to becoming a successful owner.