Busting 2 Myths On Owning Rental Property

Real Estate Blog

Owning rental property can be greatly rewarding, with the prospect of buying a home and then renting it out to raise income for paying part of the mortgage making it even more lucrative. However, there is usually more to simply sitting back, collecting rent and enjoying the income. Owning and managing rental property often requires time and energy. Read on to learn several prevalent myths that might misguide you about the whole endeavor so you can be better prepared when you do decide to get into the rental property business.

You just need enough money for the down payment

Many potential property buyers tend think that they are only required to raise enough for the down payment to buy a rental property. Unfortunately, this is far from the truth, as there are often many other costs associated with owning and managing the rental property.

For instance, the property may be in need of urgent renovations before you can rent it out and start recovering income. You may also not get a client immediately after owing the property and will likely need adequate savings to help with maintenance and other costs for the time being. Buying rental property without savings to pay mortgage charges in case you run into tough times can also leave you in a financial fix and drive your cash flow to the negative. 

The house will take care of itself

There is a prevalent myth that all you need to do as a rental property owner is to purchase the house, and the rent raised will cover all expenses. However, it is important to take into account regular wear and tear in the property that could cost you money, which is why hands-on management of your own property is very crucial.  

For instance, the roof should be re-coated after every 2 years or so to avoid extensive damage to the shingles, while the air conditioning ducts should be sealed regularly and insulated to prevent damage to the AC system. Instead of waiting for tenants to bring up complaints on required repairs, taking initiative to inspect the property and discover problems early will often help save you a lot of money in repairs. 

Letting problems fester can lead to a situation where the rent money you get isn't enough to cover overdue repairs and associated expenses. Additionally, you can save on real estate agency fees by adopting a hands-on management strategy where you take care of your property yourself. But if you don't have the time or ability to take care of it, you should budget for a company like management services to take care of this for you.

11 July 2016