YOUNGSTOWN, Ohio (WKBN) — Owning a successful income-producing property involves plenty of early mornings, long days, and late-night wake-up calls to handle issues like broken pipes, tenants locked out, or a broken water heater.
In short, it takes time and effort, according to Chad Cromer of Community First Real Estate.
Chad shares these things to consider before buying a rental property.
1. Cash flow. You need to maintain positive equity, otherwise you’re just losing money. Do you have enough money to pay for upgrades or will you try and run the property on a shoestring budget?
2. Maintenance. Since you’re the property owner, it’s still up to you to fix items which break in the normal course of use.
3. Credit checks/background checks. These are vital and extremely important to make sure you get a renter who is going to respect your property and not just beat it up.
4. Return of investment Be realistic about the balance of time and work, with your expectations of profit. Are you willing to work hard and get dirty? You may be rewarded for the time and effort. Otherwise, you may be better off choosing to use the money for financial investments, and having a qualified representative help you pick the proper investments.
5. Will it be a short or long term investment? Like most investments, real estate goes thru cycles too. Be prepared for ups and downs. Are you willing to stick it out thru a downturn? Are you ready to handle managing a property for the long term, like finding new tenants, paying for upgrades, etc.
Picking a good tenant is vital for an income producing property. The owner’s relationship with the renter can make or break the deal. Chad Cromer of Community First Real Estate has these pointers for finding a good match.
1. Have a face to face meeting. Some people sound good on the phone, but things can be different when you put a face to the voice. Make sure the person you talked with looks as good as they sound. The meeting is just as important if you found the renter via email.
2. Have a credit check done. Does the renter really have the funds to rent this property? Or were they just looking for a nice place to live and will leave you high and dry when their money runs out?
3. Develop a tenant pre-approval process. At the very least, this should include a credit check (discussed above), background check, tax return verification, current pay stub (to verify they have a job), and two months of bank statements (to verify their balance and look for NSF’s non sufficient funds.