One of the major ways you can profit from buying real estate investment properties is through renting out your new acquisition. There is a great opportunity now for investors to make their property generate a steady stream of income in the form of rents. With literally thousands of foreclosures sweeping the country, there is now a huge tenant base looking for places to rent. No wonder that rental homes are now going for premium prices in many parts of the country, since there is so much competition for rentals. But the question is, do you have the stomach to become a landlord?
Becoming a landlord entails more than sitting back and waiting for the rents to come in. You have to deal with the tenants and actually go out and collect rents from them. If something breaks, you have to be the one to fix it. And worst of all, you may have to actually evict someone, which can be a very painful and emotionally draining process. But if you’re ready to accept the challenge, it can also be a very rewarding and profitable experience.
There are two tasks you need to undertake before you rent out your real estate investment properties- decide a reasonable level of rent to charge, and screen the tenants you will rent your properties out to.
How much rent should you charge? You should use the going rate in your area as a baseline, and then adjust the figure depending on what you want to achieve. For example, if you want the property to be rented quickly, then you could price your rent below the going rate. This will also give you a big pool of potential renters that you could choose from.
When screening tenants, you should set out pre-qualification requirements on the basis of income, employment history and credit record. The point of the pre-qualification process is to find a tenant who will pay his or her rent on time and who will not give you problems that may require you to evict them or take other forms of action against them. And make sure to meet with the tenants yourself before deciding whether to rent to them or not, since you can learn a lot simply by talking with them face-to-face.
Once you’ve selected your tenants, you should start to compute a budget for property repairs; for example, you could allocate a certain percentage of the rental property’s value towards repairs. And when a tenant calls you for repairs, make sure you respond promptly – either by doing the repair yourself if you can handle it, or by bringing in a professional.
Finally, try to keep a balance between your personal life and your responsibilities as a landlord in order to avoid burnout. This is particularly true if you are managing multiple properties or are planning to expand your rental holdings. Many investors who have rented out their properties have said that they would not buy real estate investment properties again. However, if you’ve selected the right tenants, and created the right kind of relationship with them, not only will they not give you problems, they might even help you by taking care of the property and doing minor repairs themselves.