Know your investment goals and objectives
The Goal of your investment is to earn profit through cash flow, appreciation and tax benefits. (Get your Free Investment Analysis Report now!) This can be accomplished by acquiring the right property at favorable terms and carefully managing the property.
- Positive Cash Flow: Positive Cash Flow will make investing enjoyable over time, whereas a property with negative cash flow will require you to pay out of pocket and can be stressful. This is why its critical to know your projected rental income, total operating expenses and mortgage P&I, and how each of these variables affects your cash flow. Order you're Free Investment Analysis Report now to see the projected financial performance of your investment.
- Return on Investment (ROI): Your ROI will depend on how your property appreciates over time and your final selling price. Over time, the value of the your home will rise and fall depending on the the housing market, but holding a property long-term allows you to ride out these cycles. In fact, most properties typically appreciate over the long-term, regardless of market fluctuations. Conduct careful research and know the development plans in your city before investing.
- Tax Benefits: Take advantage of the Federal Tax deductions associated with rental property investments! The IRS allows you to claim deductions from certain business activities of your rental property including mortgage interest, depreciation, property insurance and cost of repair deductions. (Please verify all tax information with your tax accountant).
finding the right property
- Price Range: Target homes in the price range that have the greatest demand by renters and with the number of bedrooms most desired.
- Location: Find homes closer to where the jobs are, shopping, freeways and schools and identify locations most likely to appreciate over time.
- Minimal Landscape Maintenance: Homes with low maintenance yards are less time consuming and less expensive to maintain.
- No Pools: Pools are nice, but they require constant maintenance. They are not recommended unless rental income can support the cost of a professional pool service.
- Tile Floors: Buying a home with indoor tile eliminates the need to purchase new carpet every 7 years and also saves on carpet cleaning expense.
- No HOA's or Low Cost HOA's: Check the monthly HOA fee. This will have a direct impact on cash flow and home value.
- Due Diligence: Complete a thorough due diligence before closing escrow to make sure seller has completed all obligations.
- Minimize legal liability: Make sure to carry proper Landlord insurance. You may also consider purchasing within a legal entity other than yourself to reduce liability.
tips to managing the property
- Tenants: Don't panic and decide to lease to bad tenants. They can sink your investment opportunity fast. Lease only to well qualified tenants who take good care of the home and will want to stay for several years.
- Set Proper Expectations: All parties know what to expect so there are never any surprises.
- Be Firm and Follow the Terms of the Lease: Don't accept partial rent payments and quickly follow process of eviction if necessary.
- Provide Excellent Follow up and Service: Tenants will stay long term if their needs are being met. Minimize turnover.
- Maintain the Property: Required to provide excellent service and ensure home remains in marketable condition. Respond to tenant maintenance requests quickly to prevent issues from worsening.
- Maintain Good Accounting Records: Watch cash flows closely and address irregularities quickly. If you're ever audited, you'll have your records in order.