When you first break into the world of private real estate investing and start looking into what being a landlord and having a rental property and tenants actually means, there can be a lot of information to consider. From getting your finances in order in order to qualify for a bank or private loan to understanding what your obligations to your tenants are, there a number of factors to keep in mind.
Top do’s and don’ts when investing in private real estate
DO grow your knowledge
There is much to learn when you begin your journey into private real estate investing and the best thing you can do for your career is to spend time researching and learning. While a college degree definitely isn’t necessary, you won’t ever reach success if you don’t dedicate time to growing your knowledge on the business side of real estate and investing.
DO get your own finances in order
In order to get the most out of your investment, whether it’s intended as a rental property, flip or a personal purchase, you have to make sure your finances are squared away. The biggest barrier to succeeding in the private real estate market is an inability to secure a good purchase price and interest rate thanks to poor credit, too low of a down payment and lack of income to support the investment.
DO consider your investment portfolio
As you grow more comfortable with your real estate investing game, you’ll likely want to start expanding your portfolio. While it’s important to diversify your portfolio in order to create multiple sources of income, it’s equally as important to not rush this growth process. By choosing different kinds of properties (like single family homes, multi family homes or apartment buildings) and different strategies (like short term vacation rentals, long term rentals or rehab and flipping projects) the associated risks are spread out over a variety of income methods, leading to a safer investment strategy. However, it can take years to gain the experience necessary to effectively grow these skills (and finances) so you will benefit from taking your time before diving in head first.
DO focus on being a great property manager
Being a landlord and property manager is key in succeeding in the private real estate game. Taking care of both your property and your tenant in a way ensures that both stay in top shape is the best way to ensure your investment will pay off in the long run. There are many requirements of a great landlord, but most boil down to a few key points:
- be responsive to tenants
- respond to repair requests fast
- don’t show up unannounced
- know your tenant’s rights
- respect their privacy
The ALLinREALTY Team prides itself on finding great real estate investments for those looking to buy pre-construction homes or for condo investors. Part of that service is sharing our knowledge. From offering the best locations, investment opportunities, and even helping our buyers find tenants. In Oakville and Burlington we’re your best call!
DON’T think you can know everything (before you do)
It can be surprising how much work and knowledge is actually required to be a landlord. New investors may initially be caught off guard, and shouldn’t think they can learn everything quickly. It can take time to learn everything and feel ready to create an income stream with real estate.
DON’T skip setting a realistic budget and goals
An important step when investing in private real estate is to sit down and create a budget and goals that you can realistically achieve. Consider the rate of return that you’re aiming for and any expenses that might factor into your carrying costs.
DON’T forget to check out the local neighbourhood
Before investing in a home, especially if the intention is to rent it out, you’ll want to explore the surrounding neighbourhood. Look online to gauge the property value and take a walk or drive around the neighbourhood to ensure it is a desirable area. Knowing whether there are amenities like schools, parks and shopping nearby will help to decide whether the property will be easy to rent out at a profit.
DON’T Underestimate how valuable a stable tenant is
When renting out your investment property you will have to go through the process of finding tenants. When you do find great tenants, it is often very worthwhile to create the kind of landlord/tenant relationship that makes them want to stay long term. Once you’ve found tenants with good credit and references and who pay their rent on time, you’ll likely want to hold onto them. If you are unable to meet the needs of your tenants, you may want to consider hiring a property management company, though that can cut into your profit margins so think that one through before you commit.
With all these tips and mind, you’re well on your way to becoming a smart investor in real estate – in all market environments.