This is a great time to invest in real estate if you are looking to do some rentals. The market is very hot right now, and it is pricing many people out. This means that there are many people who need to continue to rent since they aren’t buying right now. In many areas, rentals are in demand because there is a shortage.
All this says that if you decide to become a landlord, you should stand to make a lot of money. That is, if you do things right. The problem is that there are a lot of common mistakes that new landlords make, and it ends up costing them money. In this article, we will go over several of those mistakes so you can avoid them yourself.
1. Not enough market research
The key to making money as a landlord is understanding how much money you can bring for a property. Some rentals will work best as short-term rentals, while others may be best for the long term. Then, you’ll need to know how much rentals are making on average for that area and the type of property.
It pays to understand what it is you should buy and what you can charge before you start finding a property. For example, if you’re looking at real estate in Texas, then take the time to understand if the rentals in the area where you would like to buy are mainly houses for students, apartments for seniors, or if it is for short-term tourists for Airbnb.
Then you can understand how much you can charge for rent for each property type. This will help you determine if it is worth buying in that area or type of property. Very often, buyers look for the best deal only to realize that they can’t get the amount of rent they need to make a profit.
2. You picked bad tenants
When the market favors landlords as it does right now, then this means that you can be very choosy about your tenants. Not taking the time to vet your tenants will sometimes result in bad tenants that don’t pay or destroy your property. It is very difficult to evict tenants, so it is very important to make sure that you do what you get the right tenants right off the bat.
Make sure to do credit checks and ask for references from past landlords to make sure that they are good candidates for renting your place.
3. You don’t take care of the place
If you let your place run down, you won’t get good tenants. Even good tenants will run out of patience if the property is not up to standards and may end up withholding payments until things are fixed.
Make sure to take care of the property, and you will make more money in the long run. Bad landlords think of the short term and neglect properties to save money. It ends up costing them more later on.