TOP REAL ESTATE MYTHS

I DON’T HAVE THE TIME TO OWN RENTAL PROPERTY There is no doubt that owning rental property can require extra time IF you manage the property yourself. IF you are looking for a 2nd part time job then you can manage your investment property IF you have the proper experience. IF you don’t need a 2nd job and IF you don’t have experience managing then you will do what you do with any of your other investments – you hire a professional to handle them. If you own IBM stock you don’t get involved in running the company and the same should be true for your rental property. You should find a professional management company before you buy, and when you close escrow let them handle it for you. You will have to manage them but most people have that kind of experience from their day job. TENANTS WILL RUIN MY PROPERTY This, unfortunately, is a misconception that is a combination of some prejudice mixed with a few true stories blown out of proportion. Our world is filled with a tremendous amount of wonderful people and some not so nice people. Not everyone is fortunate enough to be able to buy their own home but the fact that they can only rent does not make them necessarily less honorable. I believe human nature dictates that most everyone would like a nice place to live that they can call “home”. My experience is that the nicer I keep my rental property the better my tenants keep their homes. A nice property tends to attract the kind of people that are looking for a place to call home as opposed to a cheap place to live. There are good business practices for qualifying tenants that you can learn or that your professional management company will use to pick the best qualified people for a vacancy. REPAIR COSTS WILL TAKE ALL MY PROFITS Repairs are a part of the rental property business and no different than the normal expenses of any business. In projecting future profits we usually make an estimate of repairs for the future based upon a percentage of the gross or some actual dollar values. This is tougher when you first buy a property because you have no operating experience with that property. The best way to have a better chance at a more realistic projection is by doing a detailed inspection during the inspection process. Hire a professional inspector that has experience with rental property. That should give you a good idea of all the major systems and what improvements might be necessary there. You and your property manager should take a hard look at the carpets, vinyl, window coverings, and other general items to see what might need to be done in the near future. This should make your job of estimating much more accurate for the near term.   Marty Stone