Most Common Mistakes Made Managing Boston Rental Properties
Purchasing investment property and becoming a landlord is a great way to build steady and long term wealth. That’s exactly how a great deal of people across America gain millionaire status. Along this journey to financial independence you are going to have to develop a certain mindset of constant and never ending improvement. You are going to run into challenges and obstacles. How you tackle tasks and impediments can have profound impacts on how quickly to ascend in real estate investment.
If you’re new to managing rental properties, there is something that you should know up front. You are going to make mistakes. Relish the mistakes, it’s part of the growing process. It’s inevitable. That being stated, the best real estate investors gain knowledge from their mistakes. When you make a mistake managing your rental properties it will typically cost you time and money. It’s vital and necessary to keep moving along and know that the next property you buy you will be better prepared to make wiser decisions.
Chances are high that you won’t make the same mistake again. Even children who burn their hands by touching a hot oven learn from their mistake. The bottom line is that managing rental properties is a learning experience. Boston real estate is a highly competitive marketplace, so take advantage of every opportunity you can to network and gain knowledge from as many veteran landlords and property managers in the field. It will take you a bit of time to become good at your job. Be comfortable with the learning process. If it takes you 20 years to become a master of real estate in Boston, that’s what it took, it is what it is, enjoy the journey. However, we can help you get started by providing some valuable advice that might speed up your process of real estate acumen on Boston rental properties.
So, without further ado, here are the most common mistake made managing rental properties.
Proper Mindset and Having a Plan
Are you interested in purchasing an apartment building or complex? Perhaps you’d rather start off with something smaller such as a duplex. You need to ensure that the investment property is either occupied or will be as soon as possible. In Boston real estate investment you will hear countless landlords say “cash flow is king” and they are quite correct. You need to do some financial modelling and forecasting before you purchase a Boston rental property. The tenants are your revenue stream. That means any empty units are costing you money rather than making you money each month. This is where a great deal of investors, who are new to managing rental properties, tend to make mistakes. New investors haven’t done enough due diligence on what the rents will be and how long it will take to either renovate or find new tenants.
When new landlords are anxious about obtaining tenants, they tend to overlook important factors. For example, you may decide to ignore or even skip both the background check and the credit check. This can be a critical mistake. The background check provides you with valuable information. The potential tenant may have a history of negligence or improper life decisions that might leave you with a tenant that is not paying rent. The credit check also provides you with valuable information. The potential tenant may have poor credit, which means they fail to pay their bills on time or at all. It’s far better to have empty units instead of tenants who don’t pay their rent or play by the rules.
The eviction process can be brutal on Boston real estate owners. The eviction laws in the Commonwealth of Massachusetts tend to favor the tenants. That means the process is difficult, expensive, and can be drawn out for long periods of time. The good news is that you will most likely avoid these headaches with the proper tenant screening process in place. You can expediate your learning process by also working with real estate professionals in Boston that know apartment leasing. If you seek out market leaders in apartment leasing they tend to have the most knowledge and experience so the time they spend with you can be invaluable. Not all Boston real estate companies focus on apartment leasing. You should also be diligent in who provides you with wisdom.
Failure To Fully Understand The Fair Housing Laws
If you’re managing rental properties, it’s incredibly important to be familiar and be well aware of the Fair Housing laws. This holds particularly true when you’re reviewing rental applications and approving or declining new tenants. The Fair Housing laws protect consumers. In essence, they make certain that everyone has equal access to housing. As a landlord you’re not allowed to discriminate against tenants based on their color, disability, race or religion. You’re also not allowed to deny an applicant based on their national origin, sexual preferences, or family status.
There are additional protections for tenants on the state and local levels that you should be familiar with as well. This is an area in which many people who manage rental properties have gotten into trouble. If you fail to comply with the Fair Housing laws, you’ll face some pretty hefty fines. For example, the maximum penalty is $16,000 for a first violation. That number increases to $37,500 if another violation occurs within a five-year period of time. If three (3) violations occur within a seven-year period of time the penalty increases to $65,000.
If you turn down a rental application, it may be perceived that you’re discriminating against that applicant even if you’re not. That means you must handle each and every rental application with diligence. You must communicate with each and every applicant in the exact same manner. It’s also important to keep good records. That way you can prove that you turned down a rental applicant based on their ability to pay the rent. That of course is based on their income and credit check.
Not Managing Rental Properties Like A Business
Most real estate investors who purchase rental properties already have full-time jobs. However, managing rental properties is a business in its own right. That means you need to treat it like a business. If you neglect your business, it will fail. You need to create a business plan. You also need to coordinate with accountants, tax preparers, lawyers, and financing professionals. You’re the one who will be responsible for setting up separate bank accounts for rental payments and property management items.
This endeavor can be incredibly profitable. However, it’s not a hobby that you can work on whenever you feel like it. Managing rental properties is more like a second job or even a side gig. That means you will need to give up some of your free time in order to succeed at it. There is a great deal of tasks that you will need to take care of on a regular basis. For example, you are responsible for ensuring that the rents are collected each month. You are also responsible for ensuring that the property is in good working order. Be honest with yourself. If you want to make more money you have to invest time. No one is going to manage your Boston rental property for you for free. If you want to hire a property manager in Boston, that is fine, but expect to pay for service that might cut into your positive cash flow.
If repairs need to be made, you’re the one that the tenants will go to first. Even if you delegate the work to a maintenance person chances are you still need to handle the calls. The bottom line is that you are in charge of managing these tasks. The reward of owning investment property reflects directly on the effort that you put into it.
Failure To Manage Your Time Efficiently
As we mentioned above, managing rental properties is a business. Depending on how many properties and rental units you own will determine how much time you need to spend running your business. This can be a difficult balance for people who also have a full-time job. Most real estate investors work a full-time job. It may take years to maintain your lifestyle with the profits from the rental income instead of a full-time job. That means you need to manage your time efficiently and effectively in order to succeed. When you have the right mindset and think about things taking time over the years it really starts to pay off. You will often see huge results five to ten years later. Think of it as growing a tree which gets stronger and bigger over time.
You may also need to hire others to handle some of the duties that are involved with managing rental properties. Many people start out without a property manager, but over the years as their real estate investment portfolio grows they need help. You simply can’t be at five places at once. That may very well include hiring a property manager. You may have to give up some money to gain time and work more on strategy and planning. Although it will reduce your overall profits, a great deal of real estate investors thinks it’s well worth the money. You will know when you are ready for a property manager. Don’t overthink it, it will be a natural decision based on your circumstances.
In conclusion, managing rental properties that you own can be a highly profitable and highly rewarding experience. If you’re thinking about buying investment real estate and managing rental properties, please contact Boston Pads today. www.BostonPads.com. On Boston Pads you can find numerous real estate investment specialists. You can find professional real estate agents will guide you through the process from start to finish. We look forward to working with you.