Archives for April 2014

Read This Before Getting in the Rental Business

Repairs to HouseYears ago I had a conversation with a friend about some repairs on one of his rentals.  It went something like this:

Me: “Brett, I have some bad news today.  The garage door on one of your rental units warped and fell off its hinges.  I had a professional check it out, and they said it was beyond saving.  It will cost about $700 to replace.”

Brett: “That is too bad.  You know how to stop that from happening, right?”

Me: “How is that?”

Brett: “Get out of the rental business.”

The phrase, “get out of the rental business,” is a common joke amongst many of us who have been in the business long enough.  We know that there is only one way to stop many of the expenditures of owning rental property: never own it in the first place.  Otherwise, we take expenditures as a fact of life (as in any business).  Once you learn to handle them, this can become a very rewarding investment.

But here is the problem that I see too often: not enough people are told about the realistic expectations of owning rental property.  There is a myth going around that once you have the money to buy real estate, you can just sit back and watch the money come in.  It isn’t as easy as that.

Let’s face it; there are a lot of things that can go wrong with a rental unit:

–       Obsolescence (problems arising from a house getting older):

  • Roof starts leaking
  • Water Heater stops working
  • Toilet, Window, Faucet, HVAC problems, and more

–       Vacancy and Collection Loss

–       Tenant can mistreat the property

  • Stains in carpet
  • Uncleanliness
  • Unkept Yards
  • And more

–       Non-Payment of Rent and Eviction Lawsuits

You get the idea.  No matter how hard we try to prevent these things from happening, there is no way to stop all of them.  A good application process can weed out the really bad tenants, and a good insurance policy can stop a lot of major bills, but there are still expenditures that come about through owning a rental unit.

As a property manager, I feel like it is my duty to let owners know of these problems.  If you are thinking about getting in the rental business, but haven’t heard about the risks of this business, contact me and I can help explain it to you.  If you are in the rental business, but were never told of the risks beforehand, we can help you out as well.

I love the rental business; it is where I put the majority of my money.  If I didn’t think that it could work, I would have gotten out a long time ago.  In writing this post, I am in no way demeaning the thought of owning rental units; I just want every owner to be prepared for the business.

So here is the bottom line… owning rental properties can be a great investment, but it also carries much risk.  We, as a property management company, will do all we can to lower the cost of a rental unit while increasing the revenue.  Our presence can reduce much of the risk, but we cannot stop bad things from happening.  It is up to the owners to know how much they can risk.

Therefore, if you contact Loewen Clovis Realty to learn about our property management services, or to learn how to invest in rentals, we will not steer clear of the fact that the rental business is tough.  We will give you the full impression of the pros and the cons of the business.  By doing so, we hope that you get a realistic view of the business so that you can properly prepare.  With enough foresight and preparation, rentals can be a great addition to your portfolio.