Tips for Managing Multiple Rental Properties
There are many advantages of owning multiple real-estate properties. Rental properties in particular can be a great investment, especially in areas with strong rental markets. Owning multiple homes, condos, or even duplexes is a great way to bring in a steady monthly income. However, this income is not completely passive. Owning multiple rental properties can easily become a full-time job. Here are three tips for managing multiple rental properties.
Hire a Rental Management Company
One of the most difficult things about rental properties is seeing to the needs of tenants. Doing repairs, collecting rent, and other day-to-day issues can easily make owning rental properties a larger burden than the owners are prepared for. So why not let another company do most of the work? Rental management companies take care of most of the day-to-day problems. The cost is usually between 8 percent and 12 percent of the monthly rental income. The main downside is that a rental management company can eat into profits. However, for owners who are looking to have as few day-to-day responsibilities as possible, a rental management company may be the right choice.
Look Out for Start-Up Costs
In order to make income off a rental property, it's important that you purchase at the right price. Paying too much for a property can really hurt profit margins and potentially lead to a net loss for a number of years. Start-up costs often involve a certain amount of renovation in order to make the property attractive to renters and to get it up to code. Certain renovations also offer better returns on investment. This is important to consider if there is a chance of selling the property in the future. Adding bedrooms and updating bathrooms and kitchens tend to be the best renovation projects for rental properties.
Put Aside Money for Repairs
No matter how well maintained a property is, things will eventually break. It can be difficult to estimate how much repairs and maintenance will cost; however, estimates usually place these costs between 1 percent and 3 percent of the property's overall value. Real-estate investors should consider having a reserve of liquid funds for these instances. This is especially important for landlords who do not use rental-management companies. Many state and local laws require repairs on rental properties to happen as soon as possible. This is why having a reserve of cash is important.
Investing in real estate is a great way to generate income. For those who are interested in rental properties, it's important to consider hiring a management company, correctly estimate start-up costs, and put aside money for repairs and maintenance.