Want to be a landlord? Here are some points to consider.

Pointers To Consider As A Real Estate Investor

When researching the income potential on a piece of property, here are a few things to consider.
You should:

• Be comfortable with your financing strategies. The bottom line here is whether you can afford to take on a significant investment that can potentially occupy a lot of your time and money.
  
• Talk to other property owners and pick their brains. Find out what it’s like to be a landlord by talking with other rental property owners of similar properties to get several perspectives on the realities of the business.
• Check sales comparisons. Determine going rates for similar properties and what gets covered in the pricing of rental units for sale.
• Consider the possibility that not all units will be rented immediately, leaving you with a lower amount of income in the first few months.
• Know what your basic expenses are going to be: start out by tallying up the amount of your monthly mortgage payment as well as the cost of your property taxes. Property taxes that are paid yearly can be divided by 12 to get a monthly tax figure.
• Check into the cost of insurance for your property and what the policy will cover on the rental property. Estimate the cost of the premium in monthly increments.
• Consider what the rental price will cover for your tenants. Some landlords opt to pay for some utilities such as sewage, water, and heat while others choose to pay for nothing extra. There are pluses and minuses to each decision, especially if you choose to pay some of the bills. Be prepared for tenants who may take advantage of the “free” services and utilities that you offer and consider these factors when calculating your potential costs.
• Account for the cost of advertising and marketing the property to potential renters. If you plan on requiring credit checks or other requirements for prospective tenants, make sure you know what costs will be incurred.
• Look into hiring a property manager if you’re unable to dedicate much time on your rental units. Being a landlord will require a time commitment and depending on your level of experience as a landlord or on the number of units you own, it may be a challenge to perform the work of a property manager if you are not a full-time investor. If the work and effort is something you can’t muster, you may want to outsource some of the real estate management tasks involved.
• Estimate the amount of money that will be spent annually on maintenance and repairs. To achieve a ballpark figure for a monthly amount, take the amount equal to 1% of the value of the property and divide it by the number 12 to get a figure for the cost of monthly cleaning, maintenance, and repairs.
• In addition to the repair costs, take into consideration other requests from tenants for replacements of items like window screens, faucets, door locks, along with other reasonable requests.
• Remember to ask for, and hold on to security money given to you by tenants. Have this money available in the event that a tenant requires a refund of the deposit, or in the event that a unit needs repair work after a lease expires.
• Carefully weigh your expected income against the expenses you’ll incur as a landlord. Consider the pros and cons of the “land lording equation.” Once you’ve estimated the figures for both income and expenses from a given property, you’ll need to subtract the expense total from the monthly income that you anticipate in order to calculate the cash flow of your rental property. If the cash flow you’ve calculated is positive, you’re one step closer to ascertaining that the profit is well worth the investment.

If you’re considering the possibility of investing in rental property, you’ll need to do quite a bit of research and preparation. Not everyone is suited to be a landlord, and if you’re not careful, your rental property investment could lead to larger financial concerns. If your rental property does not produce a positive cash flow, you could essentially go broke by attempting to become a landlord.
As mentioned, one basic element you’ll need to consider with rental properties is the concept of cash flow. Simply put, cash flow is defined as the amount of money made on a piece of property versus the amount of money you must expend on the property. If after you’ve collected all of the rent and paid all of your property-related bills you find that you’ve still got money left over, well then you’ve got a positive cash flow situation. On the other hand, if you’re unable to meet your housing expenses with the current income you’re generating from your rental real estate, then you may just be in a pickle as you’ve got a negative cash flow. This situation is particularly unfavorable if it lasts a while, as it could chip at your personal finances over time and make saving money nearly impossible.