Real Estate Rental Unit Is My Favorite Part-Time Work Strategy

My Favorite Strategy

Real estate rental unit is my favorite part-time work strategy; check About Us section. To me this is the easiest part-time job with probably the highest return and practically the lowest risk.

Define this strategy;

- We want to buy a rentable unit (condo/home) in a good location.

- The price must be comfortable.

- Preparing the unit

- Finding a tenant/Qualifying a tenant

- You can regularly maintain the unit.

- Dealing with difficult tenants

- Some expected returns

We want to buy a rentable unit (condo/home) in a good location.

The current saying is still true, ”Location, Location, Location“. So that is where you start. You wan to start looking for a rental unit in a prime neighborhood in you area; there are few of those in all areas.

Remember, we are looking for a property to rent out. At the same time you must also feel comfortable living there.

This is my formula. You must feel confidence living there if you have to; because if you are comfortable living there, potential renters will feel the same way.

How to find these properties? You can check out the local classified advertisement from the local newspaper, local advertisement from local realty web sites and your favorite realtors.

The price must be comfortable

Once you have found potential places, you can start into how to finance the unit. You can talk to a realtor or a financial advisor or get a book on real estate financing. There are tons of information on this. Usually they recommend put down enough down payment to keep monthly payments (borrowed fund) reasonable; preferably such payments plus expenses should be covered by the rental income received.

Initially, the rental income received would be small and may even be a little bit negative. But in subsequent years it should be more positive. Regardless, you should have solid equity growth.

This is one of the best saving program you can get. The tenants are paying for your mortgage on the rental unit. Here, you cannot dip into the equity of the unit easily like dipping into your IRA accounts. You can’t chop off the side of the building and sell it. So you can build a solid saving fund here on a long-term basis.

Preparing the Unit

Need to budget for this upfront. You always need to decorate the place. How good does it have to be? It should be good enough so you would not mind staying there. At least repaint the place.

Advertise the unit in the local newspaper. I do it 10 days at a time; you get some discounts. Make sure you put some advantage points in the spot, something like near a subway, close to a park, right next door to a shopping mall…

A realtor may also call you. Let them list your property. It’s worth it.

You may also tell them the best time to call you for any inquiry. The boss may frown upon these calls during the working hours. I usually ask them to call me in the evening.

Prepare a list of questions to ask them so you don’t forget, something like… Where do you work ? How long have you been in town ? Is this place just for you ?

Then when he comes to look at the unit and likes it and ready to take it you should ask him to fill out an application form. Here, you want more information like his position, salary, years working there, others. Remember, the monthly rent payments these days could be from $700 to $1000+ per month, so you want to make sure you get pay.

Lastly, if you still are not sure run a credit check or a criminal check on the guy. In my experiences I did not have to resort to these last two steps, However, I did use the previous steps regularly. An answer I had gotten was the person was a freelance writer for some magazines. To me, this is a risk and I told the realtor who brought this up, no.

You can regularly maintain the unit.

Once the tenant moves in, you must be able to take care all of the unit normal repairs. All homeowners are aware of this; even if you rent a home or condo you have to do some minor repairs.

I suggest you response within 24 hours after receiving an initial request. Then let him know when you can fix the problem. Sometimes you need to hire someone to do it to get it done. You must get it done.

By responding to your tenant promptly, you will have their goodwill and they will pay your rent on time.

In my experience, no tenants call you every month. So, you should not be spending too much time here. The unit preparation section should have taken care most of the problems already.

Multilple Families Dwelling Option

Don’t overlook multiple-family units. The price of a two-family home is not twice the price of a single family home. So, if you can swing it go for the multiple families unit.

Some Paybacks

          Real estate rental unit is an income-producing asset and monthly

          rent payment could be from $500 to $1000+. Net monthly return

          will be less due to mortgage, expenses and taxes. Don’t forget,

          you could raise the rent each time you ‘re getting a new tenant.

          That is what I usually do.

          Equity build up is an unseen profit; it keeps increasing gradually year

          to year. Check The Office of Federal Housing Enterprise Oversight

          website,    http://www.ofheo.gov/, 11-27-07. Current average house

          price appreciation is about 3.2% per year. In certain states and areas,

          it could be more.

          Monthly mortgage reduction (from rent payment) increases the speed

          of equity build up rapidly.

          So, in five years, your net equity in the property can be substantial.

          At that point, you could sell the property and buy a bigger unit or a

          multiple dwelling. Or keep the building and buy another one to rent out.

          Using this strategy, you can see that you will have something substantial

          to fall back upon in 10 years; at least two rental units. This is a minimum.

          Once you have gotten the first rental unit, you would have a clearer idea

          how many more you can handle.

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