However, it can be an intimidating process when you are first starting off. JMC² has created this article to help you navigate the trickier aspects of property investment so you can figure out if it’s the right call for you and, if it is, how to get started:
Protect Yourself
Many first-time investment property owners underestimate how much liability they are taking on. However, the risks of this kind of investment, though relatively rare, can be substantial. It is important to take steps to cover your bases legally before you begin working with tenants. For example, you should consider registering your rental business as an LLC. This will put a layer of protection between the assets you use to run your business and your personal assets, such as your home or car. This way these things will not be at risk if you ever face litigation.
You should also hire a lawyer early in your investing process. A lawyer that specializes in landlord-tenant relationships can help you avoid any legal pitfalls that might apply to your state or city. They can also go over legal documents such as your rental agreement to make sure everything is correct. Finally, if you ever must evict someone or take any other issues to court, a lawyer can help guide you through the process and protect your interests.
Nurture Your Investment
Another common pitfall rental property owners fall into is thinking of this as a “set it and forget it” type of investment. Owning a rental property is far more like running a business than like buying a stock. You can directly impact how much you get out of this type of investment through what kind of work you put into it.
For example, if you take time to renovate the property, focus on making the space attractive, and install appealing features such as new appliances or modern light fixtures, you’re going to have a far easier time finding renters. Beyond that, however, you will be able to justifiably ask for more rent and bring in more income. This does take time and money, and it’s important to make sure you’re investing in improvements that do pay off, but the right moves are well worth it.
Consider Hiring Help
First-time property owners are wise to invest in some sort of property manager that typically cost from eight to ten percent of the monthly rent. They can help them with the day-to-day operations of running a rental property. This is especially true if you also have your own full-time job. For example, if your tenant has an emergency such as a burst pipe, you will need to respond to that right away. If you are caught up all day with tasks for work, you can wind up having to make an impossible choice if you do not have any kind of outside help.
If you hire a property manager, however, they can serve as a go-between. Rather than having to spend your whole day solving the problem at your property, you can simply approve solutions and move on. This is especially useful when it comes to navigating some of the trickier social aspects of working with tenants. The tenant-landlord relationship is unique, and until you get used to how it works, a property manager who knows how to do so confidently can take the lead on these interactions.
Investing in real estate is a fantastic way to try your hand at running a business, diversify your portfolio, and bring in some extra income. Although there are some stumbling blocks, we hope this article helps you to avoid or handle them so that you can get the most out of your investment.
If you have any comments or questions please contact David Marquez, Sales Account Manager at JMC² Civil + Structural Engineering at dmarquez@jmc-2.com, (310) 241-6550 x253, www.jmc-2.com.