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Eight Critical Elements of Successful Rental Property Investing

Investing in rental property is surprisingly easy.  For one thing, compared to other investments only a fraction of the cash required to start the business needs to come from your own back pocket.  The rest can be financed.  What’s more it is very easy to find properties which meet your objectives for price, location, and overall suitability.

While it’s true, there are lots of seemingly suitable properties and lots of eager sellers, it’s also true that rookie mistakes can be devastating!  So, here are eight major points to consider before investing your time and treasure in rental property.  If you can satisfy each of these prerequisites then you have a very good opportunity to be a successful landlord.

Personal Skills Assessment - What are your skills, what is lacking?

This may be the most important step in the process.  Landlording is a business that makes lots of demands on the owner.  You have to be skilled at most areas of business administration, accounting, compliance and more.  

At lease, in the first few years you should be able to do most of the maintenance on the property including: carpentry, electrical, plumbing, flooring, and more.  If you can’t do this work you will have to pay someone to do it for you and there goes a huge portion of your profit — begging the question: “Why are you doing this?”

Financial Goals - What do you hope to gain & by when?

What specific financial objective do you have which you believe rental property investing can help you achieve?  This begins with a time line.  If you are 30 your time horizons are long 30 maybe 40 years.  If you are 60 you may not have enough productive years for this investment to fully mature.

How much and for what kind of returns are you looking?  There’s supplemental income from operations and capital returns from the sale of properties.  Each demands a different strategy and discipline.

Investment Capital - How much cash do you have?

Hard earned cash can be hard thing with which to part.  It can take a substantial sum to get started in the business.  You will need a certain minimum as a sort of ante to join the game.      

Later, coming up with cash for investment can be a good bit easier.  But, if you don’t have a decent amount of cash to invest and for contingencies you should wait until you do.

Financing - Can you get financing?

Mortgages are a wonderful invention and help to multiply the cash you have to invest.  However, you must be able to obtain these mortgages.  The variables which can come into play are:  Your credit score, other income, other assets, the market value of the property in question, the  overall market place, the institution itself.

Acquisition and Preparation - Finding, Buying, Repairs, Marketing

If you have concluded you have what it takes personally, you have the startup capital and contingency reserves, and you have locked in with a financial partner it’s time to find a property.      

This part is far too broad to cover in this short piece.  Suffice it to say you will need a variety of resources to help you find properties of the type, location, price range, and general quality you have in mind.  Once you find one and close, it’s time to make any necessary repairs and upgrades then find a tenant to rent the property.

Management - Do you have the skills?

In most cases Management skill is more important than capital for successful landlording.  For example, if your property is slated to produce a Net Cash Flow of $200.00 per month but your tenant does not pay the rent you will loose lots of money.  

What’s more, if you make the same mistake too many other landlords do — wait until the tenant is several months behind paying the rent to take action — you may lose every penny of scheduled profit for several years to come.  Translation:  that’s lots of risk and hard work for absolutely no reward!

Accounting & Administration - Can you manage money & an Office?

The Taxman demands good accounting and timely payment but he’s not the most important person in your business.  You are!  You will reap huge rewards by learning accounting at a much deeper level than many others.      

Accounting software will alert you to problems before they become a crises.  What’s more it should alert you when it’s time to increase the rent or to refinance the property to produce new investment capital or even time to sell the property.

Divestment - Retirement, Reinvestment

Landlording is generally a simple business in the sense that there are a fairly small number of rules to remember.  It is by no means an easy business largely because you become intertwined in the lives your tenants and their drama.  

It can also be a very difficult business from which to divest.  The cost of selling investment property can be high especially when you consider tax consequences.  Do a very careful and complete capital and cash flow analysis before you sell your property.  Find the best way to divest yourself and get the most of your time and treasure.


Paul Howard is the President of The Florida Landlord Network
He may be reached via email at: This email address is being protected from spambots. You need JavaScript enabled to view it.
Website: www.FlaLandLord.Com