With shows like Fixer Upper, Flip or Flop, and Hometown dominating the airwaves, many are drawn into the world of investment property. Pros like Chip and Jo make make it seem simple with their motto of, “find the worst house in the best neighborhood” and fix it up!
It’s true that investment property can be a great way to diversify, and achieve the financial freedom you’re dreaming of. But it can come with several caveats that all first time investors should be aware of.
Cost of Time
Veteran real estate investor Leonard Baron suggests that landlords be prepared to add handyman to their list of skills. This can be difficult if you’re already working a full-time job and have other obligations including a family and community involvement. But, having the basic ability to fix a faucet, change a light bulb, and repair a window could help prevent dipping into your revenue. It’s important to keep in mind that although you may be saving dollars, your time is also a commodity, and you’ll need to be prepared to spend it at the service of your tenants.
Do Your Property Tax Research
In her post, “What I Wish I Knew Before Buying Rental Property,” Holly Johnson shares that in her first year she was shocked to learn that the property tax on their investment property skyrocketed. “I’ll never forget the day I opened our property tax bill for our first rental and realized that our property taxes had gone up 300% overnight,” she writes.
She encourages owners to do your homework in order to set rental rates at an amount to cover annual expenses like property tax.
Good Tenants Save You Money
To Holly, “good tenants are worth their weight in gold.” She shares another personal example, but this time it’s a positive one. After spending $6,000 to repair a property damaged by previous tenants, Holly and her husband knew they needed to more carefully select future tenants.
“One of our homes has been rented to the same family for five years at this point, for example, and I have grown to be very fond of them. We only drop in once every six months or so, and the property is always immaculate inside and out,” Holly wrote.
Because of this, Holly made the decision to leave the rent at the same rate for however long the tenants live there. While it may seem like a profit loss, in the long-term tenants who take care of your property like it is their own save you in repair costs, and build goodwill that will continue to be profitable.
So What Does It All Mean?
Have you read through and still ca say, “Yes! I’m ready to see my fixer upper?” Great! Owning investment property can be a very worthwhile pursuit. If you’re ready to start looking around at what is on the market, we hope you’ll consider us as your real estate partner. As experts in the area, we can help not only find a great property, but guide you to the best neighborhoods to invest in as well. Browse our hundreds of listings here or give us a call (205-292-4546)!