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Financial Gurus Still Believe Rental Property Is a Safe Investment

(Investment Properties: Part 3 of 5)

The record low interest rates for mortgages have helped the real estate market to slowly improve month by month for the last several quarters. Thanks to these low rates real estate has continued to be a sound investment for people who wish to diversify their portfolio. For those people that are considering buying their first investment property here are some considerations to keep in mind.

Neighborhood History

It is wise to pick areas that are accustomed to rental homes. One of the most obvious choices would be neighborhoods close to a major university or college. If there are no colleges or universities in your area then look for certain neighborhoods close to quality schools. Schools often attract stable, hardworking tenants that will likely pay on time.

Understanding the Role of Landlord

There are two major ways to prosper from owning rental property. The first is to buy the home at a significant discount and then sell the place at a profit after the home has appreciated. The second way is to have positive cash flow. The second method takes considerable planning. Just because the tenant is willing to pay more per month than the actual mortgage payment, it does not mean that the home is profitable. There are other items to consider such as regular maintenance and repairs.

Determining What to Charge in Rent

Appraisers and real estate agents can provide information about rental rates for a certain area. This gives the investor some idea of what can be charged per month. The monthly mortgage amount and allotted figures for maintenance should be subtracted from the rent. There should be at least 15% left over after subtracting the payments and expenses. Otherwise, you run the risk of losing money.

Choosing Tenants

Once you have some interested parties and they seem capable of paying the rent it is time to begin the screening process. Experienced landlords hold fast to the rule of checking out prior landlord references as well as the tenant’s credit file and even a criminal check. The criminal check could spare you from inadvertently leasing to a felon and finding major damage to your home due to a police raid.

Research the Possibility of Using a Rental Management Firm

Some companies specialize in managing properties for investors. These firms will review applications from potential tenants, handle collecting rent payments and, most importantly, take care of the maintenance issues that pop up at the most inopportune times.

For instance, if you get a call in the middle of the day that a toilet is leaking, can you leave work and fix it? If you get a call at 2 am on Saturday morning notifying you of a sudden hole in the roof, are you capable of fixing that problem? Some people have the skills and time to manage these issues, but most people do not. In these instances it is a good idea to use the service of a reputable management firm.

Investment/Rental Properties (5 Part Series)

• Preparing to Purchase that First Rental Home (Part 1 of 5)
• Adding the Title of Landlord Behind your Name (Part 2 0f 5)
• Rental Property is Still a Safe Investment (Part 3 of 5)
• How to Pick Profitable Rental Properties (Part 4 of 5)
• Success Plan for Investing in Rental Property (Part 5 of 5)

I just had to share this.

I had just gone to the post office to pick up my mail in the morning, after that I was on my way to my office. When all of the sudden a block away from there, I see an attractive For Rent sign.  It read, "House for rent, 3bed 1 bath and 2 car garage, for $1,100 a month" Considering the area, and the features of the house it seemed like a very good deal. I wanted to rent it myself. Right away I called the number, and the man who answered wouldn't give me the address of the house. He told me that he'll tell me the address when he get's to the house in 15 mins.  He called me and showed me the house, the house was near by. When I saw it, I was impressed; the house was in great condition. I told the guy that I wanted it, but he wanted for me to give him cash, cashiers check or money order. I made an appointment with him, at the end of the day so I can show it to my wife, to see if she liked it too. Also to give him the money.
 

I was still thinking of the house the rest of the day, but I saw that it had combo lock boxes, and an electronic box keys that Real estate agents use, but not a for sale sign. He had told me that they were there for other agents to show it and rent it. Still when I got home, I logged on to the Home Search system and looked it up. Turns out it was For Sale, I called the listing office and they said: IT'S NOT FOR RENT, IT'S AN REO LISTING". Man I was so mad. I told the listing office of the situation, so they put a for sale sign back on right away the next day. The guy wanted to scam me for my money!!!!  He wanted first months rent, last months rent and $1,000.00 for cleaning deposit. That was a total $3,200.00. I got to be careful next time.

Now, this is one of the first things I tell people who are looking for a house to rent. Be aware.

After that, 3 weeks later, one of my clients calls me and tells me to look up an address for him, to see if the house was for sale. I looked it up and it was for sale! Then I noticed his his reaction. He said, the house only had the post, but not the for sale sign, and that he had given $1,800.00 cash to rent this house, to this man that showed him the house, they didn't do a contract or got his information, they just did a verbal agreement for the mean time and a contract later. So this guy just got the money and disappear, so he got away. My client tried calling him but hi's number all of the sudden got disconnected. TOTAL SCAM ARTIST!!

Now, I'm advising all my clients, renters, friends, realtors and also REO agents,  about these scams, BE CAREFUL OUT THERE.