7 mistakes new (and veteran) investors make when looking to secure income properties.

Are you looking at buying rental properties this year?

Here are 7 mistakes many investors and landlords make…and you don’t have to.

I could sum up these seven short but important points with two words: “Don’t wonder!”

1: Don’t “Wonder” what you should buy. Know what you should buy.
If you don't know, learn.  I you don't know where to learn, ask someone, anyone who's achieving the results you'd like to achieve.  Do the research on your own.  Understand the difference between what you want to buy and what you should buy. This is a huge step and has to come before any other step.

You have to be honest with yourself.  Don't get drawn in by your personal feelings and emotions. Knowing what's best requires substantial research.  That said, when it comes to market research, ‘substantial’ doesn’t mean difficult. It doesn’t even mean that you have to do any of it yourself.  Call a Realtor or two, or ten.  Not only do they do this type of research…but they do it all the time…for free!  Use this research to bring certainty into the process. Be sure to know what you should purchase, create a plan, and then stick to it.

• Only spend the amount that makes financial sense.
• Determine how much cash flow you need to make.
• Never let emotion override the numbers. 

Be thorough in your internal research as well as your market research.  Do you need your property to be local, or can it be in an area where lease prices are higher and home prices are lower?  Are you going to manage your rental(s) yourself or will you be using a property management company? Should you buy a condo?  A duplex? An older home? Is there new construction, with loan programs that provide easy AND responsible entry into the rental market? Are there limitations as to how many units must remain owner occupied? All of these questions, and dozens more, are vital to decide on BEFORE you get in your Realtor’s car to go house shopping.

2: Don’t wonder how much should you spend:
First, determine how much you can spend, then determine how much you should spend. Do you have funds in reserves to update/upgrade/repair your prospective property, or does it need to be turn-key? Do you have funds to cover vacancies; months where you may have vacant properties? Find a lender near you that will sit down and discuss special loan programs?

3: Don’t wonder what your prospective property will rent for:
Ask a Realtor, or a team of Realtors to draw up a lease/rental survey for the area(s) you’re looking to purchase in.  Also, and this is key, do a simple ‘rental survey’ of your own!  Often, Realtors use MLS exclusively to find rental properties for their clients.  At the time of writing this post, my local market showed 51 homes for rent.  Compare that to 181 homes for rent in the same areas on Craigslist.  Use ALL of the data you can.  It’s all relevant, and it should all be considered.

4: Don’t wonder if the information you have on prospective homes is accurate:
The internet is full of sites posting real estate listings online, but is that information accurate? Virtually all of the information you’ll find online is fantastic.  Very little of it is inaccurate, however, I have seen, and continue to see gross miss information on several internet real estates. Beyond the miss information is the fact that the asking price is just that; an asking price.  The sales price is virtually always less than the asking price.

Each of these sites pulls data from the regional Multiple Listing Service; MLS, which all real estate agents have direct, live access to. However these online sites do not always pull the best, most accurate, most up to date information. For this reason, it’s important to get in touch with a local real estate agent that you can trust to get you the facts.  What is the property tax rate on the property that you’re writing on? 1%? 3%?  Is the Home Owners Association really $485 annually, or is it actually $485 monthly? Is the HOA solvent? In litigation?  Your iPhone friendly app may not give you answers to the really tough questions.

5: Don’t wonder what the seller property is looking for:
Even the smallest part of an offer can land you the deal you’d been looking for. See, "How to get your real estate offer accepted."  Proceeds, timing, a possible rent back, a quick close, a long close, inspections, etc. You/we may not know (although there are strategies to find out) the real motivating factor behind the sale of a property you may have interest in.  So addressing ALL possible terms of an offer will leave you with the best odds of having your offer accepted.

6: Don’t wonder what you’re getting:
Do your Due Diligence. If you’re not an absolute expert, or you’re not buying new construction, I strongly advise that you hire an inspector to perform a home inspection and a pest inspection.  Don’t let the market or a pushy agent lure you into buying without inspections.  If you have sufficient funds to literally demolish your new home and replace it, go ahead. Save the $225.  If not, don’t let a few hundred dollars stand between you and your security.

7: After it's yours, don’t wonder if your new property is being cared for:
Use a property manager. Include landscaping and/or housekeeping if you must, but don’t let your property go.  I personally know dozens of landlords with wonderful and respectful tenants, and I know dozens who've gotten out of the income property game all together. Realize that the behaviors and actions of your tenant can help or hinder the value of your home. This might include dangerous behaviors that may need to be disclosed to prospective buyers, in the event you choose to sell some day.

Now there are many, many more influences, considerations, and concerns to keep in mind but I hope that this post has at least given you more tools than you had prior to reading it.

All for now.

#RESN