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Homeowners

8 Benefits of Owning Rental Property

There are many benefits of buying and owning rental property, especially if you choose to work with a property management company. 

As with anything in life, there are both pros and cons when it comes to purchasing and owning rental property. Some have done very well in the business and others who have not. Each one of these individuals could give you a list of pros and cons – and they may not all look the same.

When it comes to determining the benefits of owning rental property, it comes down to the investment. If you do your research and invest in a property that is going to be marketable, then you are going to reap the benefits – benefits that far outweigh the negatives.

So, what are the benefits of owning rental property? We have got eight to spark your interest.

1. Rental Property is a Source of Passive Income

What if you could continue to make money while you and your family head out on a three-week vacation? What if you opened a bank account that just gathered money on the side while you continue to push forward in your full-time career? What if you spent your days doing what you love while money still comes in?

Passive income is money that you consistently make without putting in much effort at all. Who would not like the sound of that? That is why it is one of the biggest benefits of owning rental property. Whether you are wanting to use this money to make a living or to save for your future, it is a great way to earn without having to put in the time.

2. It is Not Hurt by Inflation

The word inflation can leave some people in a panic when they hear it. Inflation is a sign that prices are rising – and the world around us is getting more expensive. But for those who own rental property, inflation can be a perk.

See, as prices rise, so does the cost of living – and that means the rental rates. Landlords can increase the rent for their rental annually, never feeling overwhelmed by inflation. But are you ready for the best part? The mortgage payment on your rental property is fixed. As your rental price increases, so will your cash flow.

3. Properties Allow for Investment Diversification

You never want to invest all your money in one type of investment. Why? Because investing, in general, can be risky. One sharp turn in the stock market, for instance, and you could lose everything. It is best to diversify your portfolio to include various types of investments – include property rentals.

4. Rental Property Helps You Plan Your Retirement

When you retire, do you intend to simply sit back and live off your social security payment? Do you intend to live comfortably that way? You may want to think again. The way of the world today is not incredibly supportive of those who intend to live solely off of their social security income. While it may be possible, it is not always a very enjoyable retirement.

Rental property can help you save for your retirement. Not only can you put money aside in savings that you’ve earned throughout the years off of your rental properties, but you can also continue earning money from them even while actively living in retirement.

Gone is the fear of running out of money before you die.

5. It Means Always Having a Place to Live

Many people invest in real estate for the sole purpose of purchasing and owning rental property. Others decide they are going to rent out their home for a few years while they relocate, whether it is for a job or family reasons or even just to seek out an adventure. Sometimes it is hard to let go of a home you love.

Choosing to offer it as a rental property means being able to still have your property for your use in the future without having to worry about getting the mortgage payment paid.

You can always go home. In the meantime, though, open it up to renters.

6. Rental Property Appreciation is Good for Your ROI

Appreciation plays a big role in determining your final ROI. You cannot buy property, fix it up, and flip it – expecting a huge ROI. Sure, you may get one, but you also may not. Instead, allow your property to build up its appreciation. Buy it and turn it into a rental, holding on to it for at least ten years. Annually, appreciation has been increasing consistently for the last five decades.

In 2020, the Phoenix single family market experienced an average appreciation of 12% even during COVID. Imagine how much equity you would have if you had already purchased a rental property in Phoenix AZ.

This is definitely something to consider when choosing your investments. Take advantage of property appreciation.

7. Properties Creates Tax Benefits

There are many tax benefits of owning rental property, and they come in the form of potential tax deductions. If you are paying a mortgage on your rental property, you can deduct the mortgage interest from your tax return. Most landlords find this is their largest deductible expense.

In addition, you can deduct property taxes and licensing requirements. Other deductions include operating expenses, depreciation, repairs, and maintenance. Rental properties provide more tax benefits than almost any other investment and partaking in all the potential tax write-offs can improve your financial stability.

8. Rental Property Can Be Managed By Professionals

Perhaps the best benefit to come with owning rental property is the fact that property managers are available to handle it. Once you purchase your investment and are ready to rent it out, a property manager can handle everything else. From marketing the property, screening potential tenants, handling routine – and emergency – maintenance, preparing documents and leases, scheduling walkthroughs, and so much more.

Property managers allow you more time to invest, work your full-time career, or play golf. You do whatever you need to do, and they handle the rest. Sounds good, doesn’t it? Sometimes, the idea of investing in rental property sounds great, but the reality of all the work that comes with it can be a deterrent. Knowing that you have someone to handle that for you is a huge benefit.

Final Thought

While all these benefits are wonderful reasons to invest in owning rental property, it should be noted that you have to make sound investments for this to work. Talk with a property manager, get to know the area and the market, and do your due diligence before you invest. Do not miss out on what rental property can bring you.

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Property Management Tips

The Importance of a Strong Landlord Tenant Relationship

Having a strong landlord tenant relationship is an important aspect of maintaining your properties and encouraging long-term tenancy. These tips can help you improve your relationship with your tenants.

Buying investment properties takes a specific set of skills. Maintaining healthy relationships with those who live in the properties takes an entirely different set of skills. If you have been a landlord for any amount of time, you know exactly what we are referring to.

When you have tenants in your rental property, you are not only responsible for maintaining your investment, but you must also work on building a relationship with each other. Sure, you each signed a lease that has a set of rules and obligations to follow. But, life is not that cut and dry, is it? Things come up – employment changes, plumbing breaks, and so on. You and your tenants should be comfortable enough to work together to handle anything and everything concerning the property.

This relationship is not only important to maintain the health of your investment but to also encourage long-term tenancy.

The Importance of a Landlord Tenant Relationship

Are you wondering why a relationship with your tenant even matters? After all, you have a lease that states everyone’s obligations – so why build a relationship?

For tenants, this relationship means having comfort knowing that if a maintenance issue arises, it will be taken care of. It means feeling at ease where you live – and the likelihood you can stay year after year.

For landlords, having a healthy tenant relationship means a lower vacancy rate and higher profitability, hearing of minor repairs needed before things get out of hand, and having the confidence that your tenants are caring for your property as if it were their own.

It is a lot easier for everyone, in general, to rest better at night when your settled in your landlord tenant relationship.

Why the Landlord Tenant Relationship Struggles

You can find yourself with some of the best tenants and still struggle to communicate with them. Why is that?

As a property owner, you take on a ton of stress – and a lot of responsibility. You are constantly on call, with your phone ringing all hours of the day and night for repairs, whether an emergency or not. You have to handle paperwork, inspections, maintenance, rent collection, and more. Sometimes the stress feels so heavy that it can be hard to be available when a tenant wants to chat. And, even harder to be kind about it.

Though no fault of your own, let’s be real – this is not the way to a healthy relationship.

Tips to Nurture Your Landlord Tenant Relationship

If you are ready to give your landlord tenant relationship a healthy boost, here are a few tips you can try. Keep in mind that you must be consistent.

1. Have an open-door policy

You will want to be approachable to your tenants. They need to know that if something happens or if they have a concern, they can reach out to you and that you will be available for them. If your tenants are too afraid to call you for a small repair, for instance, you could find yourself with a much larger, more expensive repair down the road.

Encourage your tenants to call you and be available when they do.

2. Be responsive

It does not matter how available you are for a text or phone call if you do not follow through on your end. If your tenant reports that a repair is needed, has a concern about a neighbor or the like, then you need to act on it. Your tenants need to know they can count on you – or perhaps they will not reach out next time.

3. Acknowledge their concerns

If your tenants reach out to you to discuss something, be respectful and listen. They are the ones who are residing in your investment property – so they know the place (and surrounding area) up close and personal – maybe even better than you do. If they want to share some knowledge or concerns, let them – and address everything accordingly.

It may or may not even require action on your part. But, allowing your tenant to feel heard can make all the difference in the world.

4. Be kind – and offer treats

Of course, this is not going to be something you do all the time but offering an occasional treat to your tenants can make them feel appreciated. And who does not like that feeling? Give a small token of kindness like a gift card to a local home store or restaurant on a holiday or consider doing an upgrade at the property if they decide to renew their lease.

It doesn’t have to cost much at all – it’s the act that makes the difference by showing compassion and care.

Build the Relationship With a Property Manager

You may have envisioned yourself having a nice portfolio of rental properties, creating a peaceful way to make an income while you enjoy life for a bit.

And then… you become the landlord.

It is a stressful job. And, having to work on nurturing relationships can add even more stress. It is hard to act respectful and kind all the time when you are feeling weighed down and overwhelmed.

Well, here is where the good news comes in. What if we told you that you could focus on what you do best – investing – and allow someone else to handle the rest?

The best way to manage your landlord tenant relationship is by using a property management company. A property manager is like an expert landlord. They can handle all aspects of maintaining properties, including tenant screening, rent collection, maintenance, and evictions. And, yes, they also work to nurture the relationship with tenants.

As a professional in the industry, property managers are ready to handle anything that arises – and they have the means to do so. For instance, having a maintenance staff on call 24/7 and an online software system that makes reporting issues easy. Rent collection is a breeze and – when it is not received on time – there are processes and forms in place to handle that, too.

Choosing RPM Evolve

The relationship between a landlord and a tenant is important on many levels. At RPM Evolve, our property managers can step up and fill this role, nurturing the relationship – increasing your profitability along the way.

Categories
Landlord Property Management Tips

5 Warning Signs That May Appear On Your Tenant Screening Report

Tenant screening is an important aspect of finding the perfect residents for your rental home. Here are 5 warning signs that may appear on your tenant screening report, and what you should do if you see them.

Your rental properties are an investment – which is exactly why you do not want to let just anyone sign the lease agreement. You are looking for high-quality tenants that you can count on to be respectful, communicative, and on-time with the rent. This is precisely why a thorough tenant screening report is crucial.

Sadly, tenant scams are becoming a major issue in the rental world. And certain past behaviors can predict future behaviors. Before you rent out your investment to a new tenant, be sure to carefully review the screening. Taking precautions rather than accepting the report at face value may save you a huge headache and a lot of money down the road.

Here are 5 warning signs to look out for in a tenant screening report.

1. Employment History And Verifiable Income

You should always review a tenant’s employment history. After all, a tenant with a steady work history shows reliability and responsibility. There is a good chance this tenant will pay rent on time. But, what about the tenant who changes jobs frequently? This is a red flag. If he or she does not often maintain regular employment, how can you be assured rent will be paid?

Another thing to consider is double-checking employment. Tenants often try to scam landlords by putting down a friend or family member as a supervisor – even giving a personal number as a business contact. Do your due diligence by looking up the company’s info online and calling the number listed on the website to confirm employment.

COVID-19 added another important layer of employment verification. At Real Property Management we require potential tenants to provide proof of income. We verify the ability to pay rent by requiring a minimum of two pay check stubs from the employer. Unfortunately, those who were hit hardest with COVID were those making cash tips. Often, cash tips are not reported through pay check stubs and are not considered verifiable income. This is important to require and review from potential tenants in order to reduce the risk of non-payment due to COVID-19 hardships.

2. Credit Checks

Nearly everyone has some debt. Things like student loans, car loans, credit cards, and even medical bills are quite common. Too much debt – and too many open accounts – may mean there will be a lot of people out looking for money from your tenant. Will your rent get paid?

While reviewing the credit report, look at negative marks, such as late payments, foreclosures, and auto repossessions. These are warning signs that could form a picture of the tenant and his or her ability (or lack thereof) to be financially responsible.

3. Criminal History

A tenant with a criminal history should not always be an automatic no. A history of minor incidents years ago in the past may not be worth denying someone who otherwise seems like a perfect fit. Those early adulthood years were a struggle for many high-functioning adults today. However, the red flags on a tenant screening report that you should pay attention to are whether there is a consistent pattern of crimes over time – or whether there is a serious crime listed on the report.

Use your judgment and determine whether the crime committed could potentially leave you, your property, or other tenants in a vulnerable situation.

4. Rental History

On the tenant screening report, the applicant will have to list prior addresses with landlord references. Depending on your procedure, it may go back any number of years. Look at the most recent landlord/s and follow up to discuss the renter.

You will want to know if payments were made on time, if notice was given before leaving, if the property was well-cared for, and so forth. Consider asking the landlord if he or she would rent to the tenant again in the future.

5. Blanks on the Application

When the tenant filled out his or her application, were there any blanks? Not only could this interfere with a thorough tenant screening process, but it could also mean that something is being hidden. Never assume that a blank is a simple oversight.

Your tenant screening report could be missing information if it was not included on the application – so be sure it is completed in its entirety so that you can have a solid report.

What to Do if You See Red Flags on Your Tenant Screening Report

To find new, long-term tenants, you need to make sure your screening process is exhaustive. However, you also need to take into consideration that your gut has a lot to say. Sometimes you can learn more from talking to and interacting with the tenants than you would with just a formal application.

For instance, you should see a red flag flying high if you encounter any of the following:

  • A tenant who needs to move in right now. He or she does not care what the property looks like or which unit you have available. The amenities or terms of the lease are not a concern at all. This should prompt you to wonder why are they so hurried?
  • A tenant who is trying to talk themselves up. They will talk about all their good traits and the kind acts they have done. They will compliment you and even agree with everything you have to say. Your gut may tell you that they are wanting you to see all the good in hopes it may counteract the bad you may find on the tenant screening report.
  • Does the tenant stumble over words? When you ask a question, an honest answer should easily follow. If it is not the truth, though, sometimes words can get a little jumbled and stories may begin to not line up.

When you meet with the tenant, always ask to see ID. Make sure that it matches the person you are talking to – and make sure it is a legitimate ID. Too many fake ID’s are circulating and that can lead to an entirely different situation that you would be better off avoiding.

Hiring a Property Manager

Are you feeling a little overwhelmed right about now? It is understandable. As careful as you would like to be with your tenant screening, sometimes you just don’t have it in you the discernment to find high-quality tenants. Or, perhaps you have better, more effective ways of using your time.

Hiring a property manager means hiring experts familiar with a tenant screening report. You can rest easy knowing that your investment is being filled by excellent tenants who have gone through a rigorous background check by those who know all the ins and outs of the business. Of course, it also means you have more time to do what you do best – invest!

Do not risk your leaving your property in the wrong hands. Look for the warning signs, trust your gut, or simply hire a property manager.