Rental Property

Top 7 Tips to Choose A Profitable Rental Property

Are you a first-time real estate investor? An investor has to cover several steps before planning to invest in real estate and actually buying a property. Choosing and managing an investment property is not an easy task. If you are a budding investor, we are here to help you with the process.

Start Your Property Search

Many people would suggest you to hire a real estate agent; however, it is only worth once you have chosen a property. It is important to consider a budget and stick with it. Your budget might vary depending upon the fact that whether you are planning to manage the property or let a company manages it for you. There are some important factors that you should consider while choosing a rental property.

Top 7 Tips to Choose A Profitable Rental Property

Top 7 Tips to Choose A Profitable Rental Property

How to choose a profitable rental property for investment?

  1. Choose a Neighborhood: The neighborhood you are going to choose will define the period of vacancies and type of tenants you would get for the property. For an instance, a rental property near a university will have vacancies frequently during the summer break and your majority of tenants would be students.
  2. Calculate Property Taxes: Majority of the first-time owners do not consider the property taxes and the amount of money they would lose in the form of taxes. Most of the property owners do not mind the high property taxes provided they have long-term tenants. However, it is important to get an exact idea of the taxes. You can visit the assessment office or ask the other homeowners in the community.
  3. Crime Rate in Community: The last thing someone would wish for is a hot spot for criminal activity. You can get an exact idea of the crime statistics of the neighborhood from the police station or the public library in the area. Have a look at the serious crime rate, vandalism rate, and recent criminal activity in the area.
  4. Schools in Community: Most of the families would prefer a place near to a decent school. This factor will not affect the monthly cash flow; however, it would matter at the time of selling your property. Choose a property having some decent schools in the area.
  5. Availability of Jobs: More than 90 percent of the people would choose a place with high job opportunities. You can get the stats from the public library or check the US Bureau of Labor Statistics. If you see an announcement of a company shifting in the vicinity, there are chances that the employees will follow through. Although, it might affect the investment cost but it is more profitable in the longer run.
  6. Rents and Vacancy Rates: Since you are buying a rental property, it is important to find out the average rent in the area. If you are not able to cover up for the mortgage payment, expenses, and taxes with the rent, it is best to look for another property. Check the affordability of the area before purchasing the property. Check the seasonal vacancies and vacancy rates in the area. Any seasonal fluctuations might pause the regular cash flow from the property.
  7. Natural Disaster and Future Developments: You need to consider any extra insurance that you would require to cover against natural disasters. The insurance cost might eat away your profits and it is important to consider this factor beforehand. It is important to understand the future development projects in the area. It will help in value appreciation of the property.

Every city has some excellent neighborhoods to invest money, but it takes a considerable amount of footwork before the process is complete. It is important to keep your expectations realistic and complete the groundwork before investing your money.

DIY vs. Professional Property Management

As some of you may know, I have a rental property and even though everyone thinks DIY may help save money, but it actually can cost a lot. I put in a lot of time, doing everything from advertising to showing and maintaining the property. These tasks can be very time consuming and sometimes end up costing me time away from work. The commute for me is far, because my rental property is more than 2 hours away from my home. Eventually, I got tired of dealing with bad tenants and hired a property manager. I only deal with him and he deals with the tenants. He takes a cut from me every month, but it’s worth the money, because it saves me time and frees me to do other things.

All Property Management has an infographic that explains DIY vs. Professional Property Management for landlords

APM Infographic - DIY v Professional Management JPEG

AllPropertyManagement.com

Rental Property Report for March 2010

This post is an update on my rental property in Philadelphia. In this section, I talk about my landlord experience – the good, the bad, and the ugly. All my posts that are related to the rental property can be found in the Rental Property section, including the bad tenant saga series).

In March, I had to fix a small water damage in the ceiling on the second floor of the house. The heavy snowfall during the winter caused a part of the roof to leak and the water ruined the interior part of the ceiling in the child’s bedroom.

I called up my usual contractor to check up on an estimate for repair. He quoted $150 on the phone, but after he looked at the damage in person, he said that the price would be $500. My real estate property manager had recommended another guy, and his price was $200. Since I am on a tight budget, I hired the cheaper guy.

Last month, the roof repair cost $350 and this month the ceiling repair cost $200, for a total of $550. Repair costs add up quick.

Monthly Income and Expenses for March 2010 [PDF link]

 

 

Do you have a bad tenant or a bad landlord? Share your landlord/tenant stories with us.

Rental Property Report for February 2010

This post is an update on my rental property in Philadelphia. In this section, I talk about my landlord experience – the good, the bad, and the ugly. All my posts that are related to the rental property can be found in the Rental Property section, including the bad tenant saga series).

Roof Repair

My real estate property manager, Earl called and reported that there was a small leak on the roof of my house. He said that Philadelphia had tons of snow and the amount of snow caused a lot of roofs to leak. He told me that the problem should be addressed as soon as possible before more rain or snow comes.

I told him to get some quotes for different roofers. He called me back and said that he check with several roofers. He recommended a roofer that lives a few doors down by him. He said that he had hired him and he did a great job on his roof.

As for the price, he claimed he checked with several roofers and they charged $500 – 600, but the roofer he recommended charged $450. He said that he negotiated the price with him and brought it down to $350. Another $350 out of my pockets. So I gave him the green signal to go with the roofer he recommended.

Water Bills

The water bills are in my name. Usually I would pay the water bills first and then send copies of the bill to the tenant. The tenant had not been proactively paying the water bills. They sent me a few checks and the amounts are different from the amounts due on the bills. I had no idea where they would come up with the numbers.

I create a spreadsheet that detailed the water bill charges and the amounts that they had paid. The total water bill charges came out to $589.69 and the total amount I had received from them was $283.00. The difference was $306.69. I sent them a copy of the spreadsheet and copies of all the water bills.

Billing Date    Water Bill Charges
7/15/2009    71.99
8/18/2009    75.32
9/16/2009    80.09
10/16/2009    80.09
11/17/2009    75.32
12/15/2009    70.55
1/15/2010    70.55
2/16/2010    65.78
Total     $589.69

Date    Tenant Paid Amount
10/16/2009    102.00
10/16/2009    40.00
12/17/2009    81.00
2/1/2010    60.00
Total     $283.00

NET     $(306.69)

Overcharge from Property Manager

My property manager, Earl charges a percentage of the rent for his services. He would usually deduct the amount from the rent check and send me another check, less his fees. The monthly rent is $900 and the property management fee is 6%, which comes out to $54.

For this month, my tenant had also made an check of $60 for water payment. So the total amount paid to me was $960. Earl had taken a 6% cut of the entire amount of $960, instead of only the rent amount of $900. In other words, he had charged a fee on the water bill, which he should not have done. He had charged a total of $57.60, an overcharge of $3.60. Granted the overcharge was small, but I was not happy with the sneaky tactics.

I called and told him that I had noticed an extra charge on his services for the same rent amount. And I said that we had agreed that the property management fee is a percentage of the rent check, excluding the water payments. He said yes. When I told him that he had overcharged me on the fees, he said that he was human and he would make mistakes too. He asked if it was only a few dollars. I said yes and then I said that I would let it go.

Monthly Income and Expenses for February 2010


Do you have a bad tenant or a bad landlord. Share your landlord/tenant stories with us.

Rental Property Report for January 2010

This post is an update on my rental property in Philadelphia. In this section, I talk about my landlord experience – the good, the bad, and the ugly. All my posts that are related to the rental property can be found in the Rental Property section, including the bad tenant saga series).

In January, I did not receive any calls from my property manager, Earl. This is usually a good sign. The rent check came in the beginning of the month and the rest of the month was quiet. I wish for more of these months.

Rental Property Report for January 2010

Rental Property Update for Year 2009

In the beginning of year 2009, the bad tenants drama that started in year 2008 continued in 2009. My bad tenants had not been paying for rent and were not willing to leave the house. Worse, they had wreaked havoc in the house and in my landlord experience.

Fortunately, after many struggles, I got rid of the bad tenants by the end of March. The house was in a terrible condition. The carpets were ruined, the walls had holes in them, the windows were smashed, and the doors were dented. And that was only half the story. (more…)

Rental Property Update December 2009

This post is an update on my rental property in Philadelphia. In this section, I talk about my landlord experience – the good, the bad, and the ugly. All my posts that are related to the rental property can be found in the Rental Property section, including the bad tenant saga series).

Below is a snapshot of the rental income and fees since the new tenants have signed the lease in June 2009, until the end of November. I have included my monthly expenses such as insurance, taxes and interest on the mortgage, as suggested by Boston Renter. The net has finally turned positive in the report for this month, but this is not an accurate account for the year, because I have not included all the repair fees that I had paid before the tenant moved in.

Click here for the PDF file

Please note that PDF file does not include the principal payments on the mortgage, travel expenses, and all the water fees, which are still pending payment from the tenant.

In the next update, I will post an annual report that will include the income and expenses for all the months in the year. I will also include the renovation expenses to get a better overall picture.

Read more:
Rental Property Update November 2009

Rental Property Update November 2009

This post is an update on my rental property in Philadelphia. In this section, I talk about my landlord experience – the good, the bad, and the ugly. All my posts that are related to the rental property can be found in the Rental Property section, including the bad tenant saga series).

October was a quiet month, so there is nothing to report about my tenants in the month of October.

Below is a snapshot of the rental income and fees since the new tenants have signed the lease in June 2009. Boston Renter suggested to add in my monthly expenses such as insurance, taxes and interest on the mortgage to see the true cash flow. I have added those numbers in this post. The net has been in the negative territory for some time, but appears to be growing out of it. See it for yourself. (more…)

Rental Property Update October 2009

This post is an update on my rental property in Philadelphia. In this section, I talk about my landlord experience – the good, the bad, and the ugly. All my posts that are related to the rental property can be found in the Rental Property section, including the bad tenant saga series).

In September, I received a call from my property manager, Earl about a flooding problem in the house. The tenant’s daughter took a bath on the second floor and water leaked down to the first floor.

I called my contactor to look at the issue. He was the guy I usually called and had helped me with the last flood. The contractor went to the house a few days later. He filled the tub with water to simulate a bath but no water leaked. I guess it was good news to know that it didn’t happen again.

The contractor tried to charge me $50 for his time. The flooding would not have been a problem if he had fixed it on the last job. I told him that I would give him $30 for his time and I said that I would call him if the flooding issue happened again. He said it $30 was better than nothing.

Below is a snapshot of the rental income and fees since the new tenants have signed the lease in June 2009. Boston renter suggested to add in my monthly expenses such as insurance, taxes and interest on the mortgage to see the true cash flow. I have added those numbers in this post. The net is not so pretty. See for yourself. (more…)

Rental Property Update September 2009

Philadelphia - Street ViewThis post is an update on my rental property in Philadelphia. In this section, I talk about my landlord experience – the good, the bad, and the ugly. All my posts that are related to the rental property can be found in the Rental Property section, including the bad tenant saga series).

August was another quiet month from my tenants. My property manager, Earl collected the rent payment and mailed me a check for the rent minus his service charge.

I received a letter from my property insurance company, All State to renew the terms for another fiscal year. The premium for another year is $412.31. I thought I should try to see if I can get a cheaper premium plan, so I called All State. I asked about choosing a higher deductible, from $500 to $1000. The All State representative mentioned a new insurance plan is in the works. It will combine the benefits of CPL and fire, and it will be called the Landlord Policy. Unfortunately she could not get a quote from their system at the time and asked me to call back next time. All State said that they would mail me some information about the new plan. I decided to wait for it.

Below is a snapshot of the rental income and fees since the new tenants have signed the lease in June 2009. Boston renter suggested to add in my monthly expenses such as insurance, taxes and interest on the mortgage to see the true cash flow. I have added those numbers in this post. The net is not so pretty. See for yourself. (more…)