Do you remember the famous line from the holiday movie, It’s a Wonderful Life? “Every time a bell rings, an angel gets its wings.” It makes me think of another story that I’d heard recently. It involves a rather successful real estate investor who has such a bell in his home but instead of angel wings, the gentleman measures cash milestones. Each time the ring sounds, he earns $5 in income from rental properties. From my understanding, the gong goes off quite frequently—like every five minutes. Add that up over the course of a day and you’re looking at an impressive income. Project that figure over a week, a month or a year—well, you get the idea. That’s a lot of coin—all banked while sashaying around the house.
The idea that you can pocket money while having a drink on your patio is not really true. I invest in real estate rentals and, while my portfolio hasn’t quite ascended to this level, I’ve done pretty well. No one breaking into this business should ever think that they can buy properties and the dollars just come flowing in. It takes a good deal of courage to get started and even more hard work to persevere. New kids on the block need to know a few valuable tips about the industry before you get started, and I’m here to cover them.
Considerations When Investing in Real Estate Rentals
I think the bell thing is a bit flamboyant so I merely check my bank balance each day. If you do it right, buying and renting homes can indeed be a rewarding pursuit. Starting small, I dipped my toe in the real estate waters by purchasing one home and using the rent exclusively to pay it off quickly before I purchased another property. Owning the property bolstered my net worth and my equity used to acquire other rentals. One foot in front of the other, though. Here are some things to digest before you can get to the bell round.
- Locales. Even though I may happen upon what I perceive to be a smoking hot deal, the proof isn’t always in the price alone. Undoubtedly, I aim to pay the lowest price attainable for my properties. However, the location of my homes always determines the merit of the purchase. I buy homes in neighborhoods that offer proximity to major employers in the region along with schools, shopping, and entertainment. We are a society of convenience and I get that when it comes to location. No one wants to work all day and then spend another big chunk of time traveling to run errands or find a little rest and relaxation. I’m willing to balance property cost considerations with keeping my vacancy rate to a minimum. After all, what good are rentals if you end up paying the mortgage, taxes, and utilities out of your own pocket?
- Alliances. Every property I’ve purchased over the years required some level of repair. But, my business strengths spring more from the financial side than the fix-it side. I’ve learned to save some money by performing some minor repairs but I simply could not succeed without forming bonds with tradespeople. When bath and kitchen rehabs roll around, I need to get the upgrades done quickly in order to fill vacant dwellings with tenants. Unfortunately, I’ve hired some duds in the past. This trial and error paired me with plumbers and electricians who finish jobs on time and perform quality work.
- Tenants. While there are pros and cons to being a landlord, I have yet to meet one who hasn’t offered a horror story about lousy tenants. If good help is hard to find, so are good renters. Those stories shouldn’t dissuade anyone from acquiring rentals. Rather, it should just make you more vigilant when it comes to vetting prospective renters. I use a three-step process. Primarily, I perform criminal background checks. I don’t want problems with the law and the bad publicity those occurrences generate. Secondly, I run credit checks and verify income. There’s no sense in bringing in tenants who haven’t or won’t pay the rent. Lastly, I demand rental references from two prior landlords. I like to think we look out for each other and hopefully, a fellow property owner will paint an accurate picture—good or bad– of my applicants.
- Leases. Rental agreements exist for the benefit of both parties. A solidly crafted lease will detail both my responsibilities as an owner and also outline expectations for my tenants. Besides giving me legal grounds to act on if things go awry, these contracts also help me save a little money when it comes to property maintenance. I take care of services such as lawn care and snow removal but I draw the line at minor expenses. I include a provision in my leases that makes the tenant responsible for small maintenance costs up to $100, for instance. Buying light bulbs and batteries for smoke detectors in bulk cuts into my return on investment, and rarely do I get any pushback from clauses that push those reasonable requests onto a tenant.
Managing All That Goes Into Investing in Rentals
Owning rental properties will have you assuming many roles. Wearing all those hats weighed me down from time to time, especially when I am managing the day-to-day tasks of owning rentals and trying to grow my portfolio. But, I’ve found the key to building a fruitful real estate portfolio hinges on knowing when to do things myself and when to delegate tasks. I’m more of a numbers guy but when it comes to finding leads on properties to build my portfolio, I’ve come up with one of the best solutions: a HomeVestors® franchise.
As an independently owned and operated HomeVestors® franchisee, I leverage the nationally-known and trusted “We Buy Ugly Houses®” advertising campaign to bring leads on distressed properties to me. It’s so effective that, together, HomeVestors® franchisees have bought over 100,000 houses since 1996. With this marketing tool in my back pocket, I can focus on my bottom line instead of chasing qualified leads.
Contact HomeVestors to see how you can get started toward that closing bell with a strong rental portfolio.
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