"Rent That House in 2009" by Takara Taylor, AUDU Real Estate
As people are beginning to re-think their approach on how to be successful as an active participant in the real estate arena, it's sort of a no-brainer to discover the "Flip That House" error is slowly depleting during these economical times. That is my way of putting it mildly. Being here in Michigan, I feel it is depleting rather quickly, but there is always room for great positivity to take over by crafting a constructive niche during this transition in the market.
Now is the time to seriously think about establishing the old-fashion niche in the "Rental Market." It is time to start creating a "Rent that House" movement until we begin to see a bright light at the end of this tunnel. I know this concept may seem to be the least desirable for some people, especially to those who never really like the idea of being a Landlord, but instead of focusing on real estate as a short-term investment, let's look at it from a long-term stand point.
Buying and Holding a property is actually a great idea for those who are not looking to instantly obtain huge returns. When done properly, one should be able to purchase an investment property and receive cash flow on a monthly basis. In an appreciating area/or region, some may be ok with breaking even every month or having some overhead in the beginning , with the goal to eventually see an increased return over time.
In reality, here in Michigan, we are not in an appreciating market. The great thing is, you can certainly purchase an investment property way below value, so in actuality, your chances of receiving monthly cash flow can be very high in this market. Just make sure you are keeping up with the current "rental market" in the area you wish to invest in, to make sure your bottom makes sense and also cents!
Before one decides to get into the business of renting out property to tenants, it's important to understand the need to run the orchestration as a business. A lot of people get into the land lording business and don't understand that the goal is to be profitable. Some people are entranced by the idea of "owning a property" and not "running" it. If you are a new investor it is best that you do your homework and develop a system or a business plan. Here are some of the things you will need to ask yourself:
- How much monthly cash flow do you intend to make?
- What type of system will you use to qualify tenants? Will you accept Section 8 or no? Did you know that if you intend on being a Section 8 Landlord, you will need to have your property inspected and up to code before you can accept Section 8. Check your local government or state's website for guidelines. You can also check with your local housing commission.
- If you need to begin an eviction process, do you know where to go or what documents to file?
- Who's going to look after your property? Will you use a property management team or do you intend to manage your property on your own?
- Do you have emergency cash reserves for those sudden things that could go wrong with the property? THIS IS HUGE!
Land of the Tenants
When you finally make the decision to invest in real estate, and you join the Land of the Landlords & Tenants, there are few basic things that I would like to share with you as you embark on your journey. I would like to discuss the different types of tenants you should be aware of.
One of the basic things I have learned when coming across tenants is that some of them will either be headed towards a life storm, living in a storm, or maybe just coming out of one. That's just how life works for some people, no matter how much money they have or don't have. The role of a landlord is to first do research towards figuring out what point in life did you and your potential tenant connect! Remember, you are to treat this business as a business; there is little room for sad stories. The tenant will either fit YOUR criteria or not. If they don't qualify, don't try to make a miracle happen. Trust me I've been there.
Scenerio: Tenant comes to you ready and willing to move in with cash in hand. This particular tenant will present as if they currently have everything in there life together. You may have a vague understanding of why they are moving from where they were before. If you are a desperate landlord needing to occupy the place; they will convince you they have it together with little information about them. They move in; they pay the first two months, you're happy. And here it comes...you go to the mailbox and no rent money.(True Story) They call you and say..."I lost my job, because my employer found out about my criminal record, from a domestic dispute between my boyfriend and I" You can pretty much figure out what happened from there...led to eviction and LOSING even more money; along with having to cover the mortgage. Do your homework on every single tenant, it will save you money.
It is best to try to catch good tenants who are out of the storm; especially a financial storm. Their storm will affect you and your business. It is quite understood that people get in a temporary bind; but you should always start the eviction process sooner than later. The tenant will still have some time to get it together. I would say it is ok to be more lenient towards a tenant who has rented your property for 2 years versus someone who has been there only 3 months and already having problems paying rent.
Always keep in mind that when you're assessing tenants; it's about their past history and their current status. Everything may seem great but who knows what the future may hold. Have a system in place so you're not losing time and money on those unforeseen circumstances. Once you're close to the finalization of getting a tenant out of the home; start advertising for a new tenant right away.
Landlording can be a lucrative business but don't make the mistake by investing blindly. Make sure the home you are purchasing comes with equity. Know your rental market. Don't obtain a $900 a month mortgage on a home that rents out for $800. That means you are already behind in the game.
In closing; property holders can make a nice amount of money over a period of time. It's about buying at the right time, which is now. It's also about finding the right tenant to support your financial plan and knowing how to aggressively deal with the issues that may come up along the way! I would recommend reading books by Robert Kiyosaki and I definitely recommend the ABC's of Real Estate Investing by Ken McElroy.
Lastly, keep in mind that once you own your rental properties free and clear, the money comes to you directly as great passive income! If you can buy home cash, while still having a nice savings account; your plan could work out even better. So Investors, IT'S TIME RENT THAT HOUSE!
For Investors looking to invest in the Grand Rapids area and you don't have a Realtor, don't hesitate to email me at tksellshouses@gmail.com call 800-541-3378 for more information. There are houses available under 30k if you are looking for inexpensive homes!
Copyright 2008 Takara Taylor All rights reserved.
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