Three Big Mistakes Hopeful Real Estate Investors Often Make When it Comes to Rental Properties

July 14, 2015 - PRLog -- We have been through the ups and downs of real estate investing. We have made money, lost money and even during the collapse of the market, lost homes. Needless to say, we needed a process that was virtually “bullet proof”

After watching all the ‘flip to make money” shows on networks like HGTV and DIY as well as many others, people are trying their hand at real estate investing and flipping more then ever.

Here are the three big mistakes we see happening:

1- Purchase in the right market for profits.

People see these shows (which are mostly staged) of people buying homes for $150,000 to $500,000, putting in new bathrooms and kitchens and selling for profits of $100,000 or more, this can happen, but this is rare and is also the right market for Rental Properties. Here is why: We have rented to higher end clients and low-income clients as well. It seems that both markets do not really respect the home at the end of the day and will leave the home damaged and so on. We believe (from much experience) that lower income, higher profit homes are far better. We keep repairs to a minimum and profits much higher.

We can often show a home investor a literal 20% ROI, even after management expenses. So our belief, keep the purchase price very low (meaning, homes from $27,500 to $40,000 max) and the profits high.

2- Use a third party manager but make sure expenses don’t eat up all your profits.

How do you do this? If you have ever rented even one home, I am sure you have gotten that dreaded 1AM call complaining of a clogged toilet or some other issue with the home. It can be a real a pain and cost a ton of money for repairs. It is said that often repairs eat up over 40% of your profits in a rental property. Here is how you can beat this: While we offer homes for $27,500 to $40,000, fully turnkey and managed.

We avoid most repairs due to the fact, our homes are total rehabs with virtually all new plumbing, electrical and other repairs. Our service call rate is about 6% of tenants per month and very minimal repairs. You can duplicate this process, but need to know how to renovate and bring back to life homes for pennies on the dollar like we do.

3- Do not take excuses or wait for non-paying tenants.

One of the biggest mistakes is to allow tenants to say, we had our money tied up and will pay next week. People will use stall tactics and you flip the bill. Here is how we handle non-paying tenants. Typically all rents of our homes are due on the fifth of the month. We have people collect the rent (due to blue collar or lower income tenants).

We show up with either a rent receipt for payment or a “pay or quit notice”. Giving them a pay or quit notice starts the clock that day for removal of non-paying tenants. Be kind and say, I just have to protect myself, this is nothing personal. We need paying tenants or everyone loses. So, make sure you stay on top of expenses and make the real money that is available in real estate investing.

Learn More about Buying Rental Properties: http://www.rentalincomeclub.com/