If you have visions of buying a few houses, then sitting back counting your cash as you retire by the poolside, then running a rental property business may not be for you. But, if you are willing and committed to running an effective and profitable business, then a rental property business may well be right for you.
Here are some tips to consider when looking at starting your own rental property business:
- Pick your neighborhood carefully. Property taxes are not standard across the board and, as an investor planning to make money from rent, you want to be aware of how much you will be losing to taxes. You will also want to consider the crime rate, school quality and other neighborhood issues. When considering the taxes, remember that several exemptions will be removed since you are not an owner occupant. Additional veteran exemptions may not apply to you as well. Your real estate agent and tax attorney can certainly shed more light on this.
- One of the most common mistakes new business owners make is underestimating the amount of money they will be required to spend on maintenance and upkeep of your properties. Potential business owners should budget for the major repairs that will inevitably come. Remember, too, that tenants don’t always pay on time. Think about how cash flow will be affected by a late check or two -- will a line of credit be needed to cover the interest charges that accompany it? If you know someone that is successful in the business, learn as much as you can from them on how to prepare for the worst.
- Do your homework. Talk to other landlords. Get several perspectives on the business from people who have been there.
- Are you going to be managing the properties? How much time do you really have? If you are going to be managing the properties yourself, be prepared to receive the occasional emergency call and to go track down the late rent. If you are not prepared for this, a really good property management firm might be up your ally.
- Buy right. Get an experienced agent in the area you are searching and perhaps purchase a HUD home, short sale, or a forclosure to lower your cost.
Indianapolis Rental Properties