Are you looking to diversify your portfolio or maybe just looking for a reliable investment? A rental property might be your cash cow. Here are some basic yet crucial elements to consider when you’re diving into the world of property management.
Financial Situation
What does your personal financial environment look like? Here are a couple of areas to review that could affect your buying options:
- What’s in your savings account? A rule of thumb is to have at least 10% of what you’d like to borrow available in your savings account.
- Murphy’s Law is a real thing. Keep some extra savings just in case something goes wrong.
- What have your spending and saving habits been like? The bank is going to search through your history and your loan amount is affected by these habits.
Quick tip: Don’t settle for the first estimate you get. Shop for loans or loans to get different options.
Abide By the Rule
If you want a worthwhile investment stick to the 2% rule. When following the 2% rule the monthly rent you charge tenants should be at least 2% of the purchase price.
Quick tip: Look at similar rentals in your area to get an idea for what you could reasonably charge.
It is ideal that you look for san diego rental properties that are profitable enough to cover mortgage, taxes, and insurance within 10 months after buying the property.
Caution…
Take a look at the other listing in the area you are considering buying in. If you see offers for price reductions that could be a sign landlords are have a tough time getting renters themselves.
Word of the Day: DOM (days on the market or how long a property has been for sale). It is a great time to buy when the DOM is decreasing because that area is becoming popular. If you act in time you could get a great deal and have increased resale earnings.
Why Does Coffee= Life?
Coffee may not be your kryptonite, but chances are it could be your future tenants. High-end chains like Whole Foods and Starbucks have scouts that look for up and coming neighborhoods. Let their marketing team do the work for you. Millennials gravitate towards areas in which they can walk to these shops.
“You can’t just look at the numbers, you’ve got to really look at the neighborhood and understand what’s happening there” says Justin Cohen, Chief Marketing Officer of Pangea Properties.
Think about what type of tenants you want to have and what area they will be looking in. For example, a young family will want to be near schools for their children.
Quick tip: Tenants that enjoy the finer things in life like showcasing their latte art on social media have disposable income and will be tenants you know can pay their rent.
Eenie Meenie Miny Mo
Be picky when it comes to choosing a renter. You don’t want to hassle a tenant every month. Here are some practical measures to prevent a possible eviction and loss of profit:
- Even if you have to pay for a credit check it’s worth it.
- Find out if they have pay stubs or a 1099 to prove they have substantial income.
- Run a background check.
If your impending tenant passes with flying colors then entice them into staying by offering a deal. In the end a discount will not exceed the loss of revenue if a renter is evicted.
We live in the land of the free so that we have the opportunity to own our own land. Take advantage of the chance to have someone pay off your mortgage or earn a perpetual profit. Consider the aforementioned ingredients to be a successful landlord. Your well on your way to finding the right rental property.
Contact SOS Management & Property Services
Local: (858) 273-8800
