When it comes to generating residual income over a long period of time, few investments hold a candle to residential real estate. As this real estate company points out, there’s always a demand for rental properties and you can usually generate a pretty healthy cash on cash return. But if you want to be successful, you need a plan. Here are some helpful tips to get you ahead of the game:

 

  1.     Make Your Money When You Buy

There’s an adage in real estate investing that you make your money when you buy. In other words, the key to successful investing is to buy a property at a fair value (and preferably below market value). This increases your ROI from the start and promotes greater flexibility.

Don’t get pressured into buying a property by someone else – and don’t let your emotions control your spending. You might have to put in 10 or 15 offers on different properties before you eventually get one accepted, but it doesn’t matter. Be patient and stay disciplined. 

 

  1.     Assemble the Right Team

Real estate investors wear lots of different hats, but you can do yourself a big favor by assembling a team of people to do some of the heavy lifting for you. Depending on the room you have in your budget – and how much responsibility you’re comfortable personally taking on – you may want the following on your side:

  •     Property manager
  •     Mechanic
  •     Accountant
  •     Lawyer
  •     Insurance agent

The more diligent you are about assembling a team of talented, goal-oriented people, the less friction you’ll experience on a day-to-day basis. 

 

  1.     Find Stable, Long-Term Tenants

The right tenants will make your job as a landlord exponentially easier. You can make your work easy by hiring a professional property management company that will take the hassle out of owning investment property, by finding excellent tenants for the properties they manage. The question is what do you look for in a good tenant?

The easiest answer is that you want stable tenants who pay on time and lease your property for long periods of time (preferably a minimum of 12-18 months). And there are some things you can do during the screening process to identify these types of applicants.

“Ask your tenants how long they plan to stay in the area. You’ll also want to make sure your tenants are able to afford this apartment, so ask for proof of income, where applicable,” Green Residential encourages landlords. “You can also check their references and credit score to see how consistent they’ve been about paying their bills and rent in the past. A single red flag shouldn’t disqualify a tenant immediately, but multiple red flags should make you wary.”

Once you have stable tenants in your properties, do everything you can to keep them happy. Sometimes success is found in the small details – like upgrading an appliance or not raising rent when everyone else seems to be doing so. 

 

  1.     Control Your Expenses

There are two ways to increase your revenue from a rental property. You can raise rent or lower expenses. While raising rent is sometimes the best option, there’s also something to be said for purposefully controlling your expenses.

The biggest key is to prevent costly problems from happening in the future by investing in strategic oversight and preventative maintenance. Whether this means replacing a 12-year-old water heater that still works because you don’t want to risk a leak that could flood the property’s basement, or replacing windows now to lower the cost of utilities, a proactive approach will typically save you money in the long run. 

 

  1.     Stay Organized

Regardless of whether you’re a Type A or Type B personality, you need to become obsessed with organization in your life as a real estate investor and landlord.

“Like any other business agreement, renting to a tenant is a transaction that requires documentation,” entrepreneur Kristy DeSmit writes. “Collecting everything, including all communication (email, text, and paper) with your tenant, can prevent any misunderstandings later if you have proof of all interactions and agreements.”

When possible, keep paper and digital copies of important documents and agreements. This lessens the likelihood of losing valuable information by mistake.

 

Enjoy the Perks of Income Producing Property

When implemented as part of a diversified investment portfolio, residential real estate can provide a healthy amount of residual income over many years. Keep these tips and principles in mind and you’ll increase your chances of being successful from the start.