Costs to consider when acquiring a rental property
In the lead up to acquiring a rental property, emotions and excitement are high. We tend to be drawn into the deal and some things tend to slip our mind. But I need you to take a step back for just a moment and think of the other factors that can make or break you as an investor.
Here are a few costs to consider when acquiring your next rental property:
- Develop a Power Team with People you can Trust
Trust is earned, not given. Always remember that. Like any other sector out there, there is always some bad apples out there and there will always be people out there that do not have your best interest at heart. Do NOT work with these types of people. Real estate is a long term commitment. In order for you to be successful in owning rental properties, you have to have the right power team in place.
Some of the key people to surround yourself are:
- An investor focused realtor. Don’t just pick any realtor, you want to ensure you find a realtor that works with investors to help locate great properties in great neighbourhoods.
- A good lawyer. I’ll never forget the first time I went to see my lawyer and I raised concerns about his fees. He politely said, “oh yeah, and what’s that guy done for you lattely?” I politely shut up!
- A good accountant will help you structure your portfolio in a tax efficient manner and help you grow it. A good accountant is often worth their weight in gold!
- A good property manager focused on keeping tenants in your property and ensuring they pay rent on time every month. Property Management is a people business and your property manager needs to have your best interest in mind. At Welcome Home, we take care of all of this on behalf of the investor, and only include them on issues when it’s absolutely necessary. After all, they trust us to deal with these things.
- Reliable and affordable skilled trades will make or break you as an investor. Establishing good relationships with key trades and paying them within 24 hours will ensure they take good care of you.
2. Choosing the Right Tenants
Always remember, your tenants are your customers. You need to do everything in your power to keep them happy and paying their rent. You’re paying tenants allow you to have cash flow, live life on your terms, and be financially free.
Be prompt at communicating when issues arise. Prompt communication gives people peace of mind. Even if you can’t address the issue right away, they know you are thinking about them.
When screening prospective tenants:
- Make sure a background check is part of your tenant screening process. You need to know if there is any criminal history. If there are minor issues, try to work with the prospective tenant if you feel comfortable.
- Verify income & Credit. You will want your tenants to have three times the monthly rent to justify renting the property and to have enough of a buffer to afford to pay the rent.
Maintenance will make or break you as a landlord, and how you respond to these will ultimately define your success as an investor.
During the purchase process you want to ensure key capital expenditures such as the roof, furnace, air conditioner and hot water tank have 10-15 years of useful life left in them. Most furnaces last 20-30 years. Make sure you have a trusted contractor or home inspector look at these prior to making an offer.
This seems like a lot to take in, however if you follow a process you will be a seasoned pro in no time. If you don’t feel comfortable, feel free to reach out to our team and we’d be happy to help you find some great tenants for your rental property. We have the experience and expertise and have helped many investors in the Hamilton & Niagara regions find great tenants. We’d be happy to help you as well!