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Thinking About Investing in Rental Property? Here Are the Keys to Success

When it comes to investing, you have your options. You can put your money into the markets and patiently watch it inch up and down over time – hoping that the trajectory points upward over time. You also have the option of investing in things like businesses, precious metals, or speculative cryptocurrencies. But at the end of the day, the excitement and return on all of these investments pale in comparison to real estate – and rental property investing in particular.

Investing in rental properties is exciting on many different fronts. For one, you have the opportunity to put your money into a physical asset that you can touch and feel. This physical asset is also likely to appreciate, making the underlying investment increasingly valuable over time. But here’s the kicker: It can actually produce steady, monthly income for you. Thus, the right real estate investment becomes an income-producing asset to add to your portfolio and enjoy for years to come.

Finding Success With Rental Property Investments

Rental property investing, while not incredibly difficult, isn’t the easiest investment. It’s relatively hands-on and you’ll have to devote some time and energy towards managing your properties. Selecting the right property is the first (and biggest) responsibility. But once you’ve done this, you must turn your attention towards landlording.

Here’s how you can properly manage your duties as a landlord and drive a profitable, sustainable bottom line.

  1.     Meticulously Screen Tenants

A bad tenant will make your life miserable as a landlord. A good, responsible tenant, on the other hand, will make your job extremely easy. In order to ensure you end up with more of the latter, you must be meticulous with your screening procedures.

A meticulous screening system involves applications, background checks, reference checks, interviews, and common sense. Past behavior is almost always indicative of future behavior, so speak with former landlords to get the scoop on whether they pay on time, how they treat properties, etc.

  1.     Set Specific Terms

The lease agreement you present to tenants is your greatest legal protection against things like late payments, property damage, and illegal behavior. If you don’t want a tenant to do something, set very specific terms.

A good lease agreement will address things like payment terms, who is responsible for utilities, policies on pets, requirements for subleasing, expectations for notifying the landlord of repairs, security deposit information, and more.

  1.     Hire a Property Manager

According to Green Residential, one of the top property management companies in Houston, 83 percent of landlords using property managers find that tenants pay more rent, while 77 percent say tenants rent for longer periods of time.

If you want to offload some of the day-to-day responsibilities of landlording and enhance your rent collection and tenant retention efforts, a professional property management company seems to be the way to go.

  1.     Don’t be the Owner

As a landlord, you’re often thrown into the middle of very emotional situations. You’re dealing with people’s living situations, which can get a bit sticky. If you want to create an added layer of insulation, refer to yourself as the landlord – not the owner.

“This is especially true for those of you who, like me, are peacemakers and non-confrontational,” real estate investor Brandon Turner writes. “As a landlord, you are going to face a lot of tough decisions and awkward conversations. When you are the owner, the blame is on you, and as a result, you will often make decisions based on convenience rather than common sense.”

When a tenant asks you something on the spot that you’re unsure about, say something like, “I’m going to have to speak to the owner about this, but I know he doesn’t like that.” You can then come back a few hours or days later and pin the blame on the “owner.” It’s a simple way to be firm without being the target for your tenants’ frustrations.

Diversify Your Portfolio

There’s certainly a place for stocks, bonds, precious metals, and perhaps even a small amount of cryptocurrency in your portfolio, but don’t overlook the tremendous value that comes from diversifying into real estate. A well-chosen rental unit that’s properly managed over time will provide you with an appreciating asset that produces residual income for many years. What’s not to love?