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Starting Your Rental Property Business


Starting Your Rental Property Business

It’s always advisable for any individual that wants to get into rental property management in St Louis is to understand that this is a business. Some people would just jump in and purchase a property without due diligence. Some individuals just get lucky and do just fine, while others miserably fail. There are various factors for you to consider when you decide to go into the business of rental property management. Below are some of the factors to consider.


Educate Yourself

You should not just get into the rental property management business without first getting yourself educated. Research as much as you can. There are various resources about the rental business out there. There are podcasts, websites, books and just about any material you can find today. Learn and understand the terms, what they look for, the law. When you buy a property with no experience and little education, you will think it’s easy, that you will just buy a property, rent it out to a tenant and cash on the check every month. However, you find out that it’s not easy as it seems that you need to get an education, but learning from your mistakes can be pretty costly.

Determine Your Goals

You need to know the reason why you are going into the business of rental property management in St Louis. Are you going to the business for its mainly cash flow? Are you interested in increasing your net worth? Are you planning for your retirement? Do you want a specific return on your investment?  It is important for you to determine what your goal is exactly as it will help ensure that you are purchasing the right property. For instance, if you want a positive cash flow in other to support your desire to move through move around the world, then you wouldn’t purchase the same property as an individual who wants to increase his net worth. You will want to purchase a property that has already tenant occupying it as opposed to buying a property that is sold below the value of the market and will need you to make it ready and built in equity.

Financial Analysis

For an individual who thinks he got a great deal on a house, he bought for rental purposes. When you ask him how he knew he got a great deal, then he could say he bought t for $10,000 less its original asking price. This probably is not the best way to analyze your investment. There are some factors you will have to take note of when doing an analysis. Most people only look at small things like the income and normal expenses like insurance and taxes.

What about the other things that are not as obvious such as management fees. Most people who manage their properties themselves do not include such. Three reasons why they should include such are:

  • Your time is worth something. Whether you manage yourself or not, your time has a value of dollar attached to it. You need to pay yourself something even if it’s on a paper.
  • Some banks include management fee when they analyze tour loan. What if, God forbid, something happens and they have to foreclose? Then the cost is to manage the property till they sell it.
  • When you’re ready to sell your property, what if the buyer isn’t planning on self-managing? Then they will add the fees for management, so it’s important for you to add it in now.

Every property is not the same and its expenses will vary. Every possible variable has to should be included in your analysis.

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