What To Buy;

You have heard that the rule is location, location, location. That means the right neighborhood in the right city in the right state.

1. The right state should be one with high demand, favorable landlord laws, low property taxes and no state income tax. That usually narrows the field considerably.

2. The right city is found by looking at population growth and those amenities that would cause people to want to be in that area, usually called quality of life conditions.

Those might be warm average temperature, steady employment, good schools, good medical facilities, outdoor and recreational activities and solid infrastructure.

3. The right neighborhood will generally be the one containing a mix of owner occupied and rental property where the rental rates are affordable by more than 50% of the rent paying population. That means typically mean area rent or slightly lower! There is money in ugly!  I do not mean that what you buy should be falling down, what you should look for is property to which you can make simple improvements that would result in a higher rent than it currently earns. A property that is owner occupied in a neighborhood that is starting to become heavily rented may be the perfect situation. Having been owner occupied the sellers have first hand knowledge of the condition of the property, have kept it in a functional state of repair and the owners are selling to move up to a better home.

Pride of ownership is generally poverty of pocketbook! For beautiful rental property expect to pay premium price, obtain optimum amenities and end up paying for maximum maintenance, maximum insurance and property taxes. Generally there will be few things you can change or add to obtain greater income or returns on your investment. The only exception to this rule would be destination property in a heavy vacation and resort area. Logically, if you want to own this kind of property it should be in an area that you would furnish, provide utilities, use for vacation and rent out the balance of the year. This type of property becomes extremely expensive if you look to have it professionally managed and yet with technology today, this may be the easiest type of property to manage from a distance through one of the For Rent By Owner vacation rental websites. The most successful for me have been www.Homeaway.com  and www.vrbo.com. 

Professional Property Management

*Most states require that a property manager have at least a real estate license, check with the Department of Business and Industry, Real Estate Division to verify licensure.

*Make sure your management company advertises as a property management firm and that there are no complaints with the BBB.

*Ask for and review their property management contract, their lease agreement, move out inspection forms and tenant application form.

*They should review with you their management statement software and monthly report. Any firm that does not do monthly accounting and proceeds, skip.

*Make sure they run credit reports on each applicant.

*Do not have the management company pay your mortgage payments. You make them or set them up for automatic payment from your business checking.

*Set up impound accounts on your property loans so that your insurance and taxes are paid in full and on time. Both are serious problems if overlooked.

*Most management firms that have full time maintenance people cost you more in maintenance bills, competing contractors deliver the most service for less.

*Ask for referrals to check out their performance over time.

*Vacancy costs you permanently lost revenue, ask and verify how they advertise vacancies.

*Property managers should carry liability and professional errors and omissions insurance. Have them show you the coverage policies.

*All responsible property managers will ask to be named as additionally insured parties on your rental dwelling policy. Add them. It is cheap and if there is a problem, or someone gets injured, you all have the same attorney and are on the same side.

Do It Yourself Management

There are no property managers that will take care of a property like an owner, don't expect it. You will always overspend and do too much maintenance and your tenants know it. There is no question that sooner or later a tenant WILL trash your property. Be sure your insurance has a vandalism and loss of rents clause.

If you plan on managing the rentals yourself to save money, be advised that you will seldom do better than a professional and that there are some legal problems you may find as an owner/manager. Be absolutely sure to treat everyone the same way, use the same application, credit procedures, occupant count criteria, rental agreement and don't give special breaks, discounts or extensions to anyone. In the world of rentals, this is discrimination and can land you in a nasty lawsuit. For your financial health, never let a slow paying or destructive tenant remain in a property because you do not have the resources to fix up the property or carry a vacancy. That behavior will make a long term problem out of a short term expense. Do not make the mistake of thinking that owning and running a home qualifies you to run rentals well, the number one cause of real estate investor demise is land lording, for all the above listed reasons and more.

Margaret A. Bird

Magi Bird 

EMS Master (Equity Marketing Specialist)

(and yes, a Property Manager as well)

President, Remcor Real Estate

Founder, Remcor Educational Systems

Founder, Realty Equity Marketor 

4016 Kietzke Lane

Reno, Nevada, 89502

Office (775) 828-1790

Fax    (775) 828-1970

Cell    (775) 771-0100

e-mail: magi@remcor.com