There are a few common mistakes that many first-time investment property owners make that can have a devastating financial effect on their investment income. Many property owners turn to our Colorado Springs property management solutions after they have fallen into these potholes and need a helping hand out of the ditch.
Are You Ready to Invest in Colorado Springs Rental Properties?
The first thing to remember is that owning investment properties is actually a small business initiative and you must treat it with the same kind of effort and commitment that you would any other entrepreneurial venture you start.
It is going to require time, resources and having a solid business plan. If you treat it as some kind of side line hobby you are not optimizing your investment and could end up in hot water. You will have to be on top of the laws governing rental properties, handle all of the finances, oversee all maintenance issues and maintain relationships with your tenants.
This is one of the biggest mistakes that people make –they sort of go with the flow, hope for the best and make a stab at things. Tthen they are surprised when they have run out of cash flow, can’t evict non-paying tenants and sit with vacancies for long periods of time.
What’s the Going Rental Rate in Colorado?
Another area that people frequently get wrong is deciding on the rental amount. Often research has not been done properly and it results in a rental that is just too high for the neighborhood and property. Reading newspaper adverts and listening to friends is not going to give you an accurate rental amount. You must consult local Colorado property managers, realtors as well as internet listings.
Just because you have added a coat of paint and done a few renovations does not mean that you are suddenly going to be able to charge a higher rental rate. If the rent is too high, you are going to start losing money quickly as you will have an empty unit for a long time.
A lesson that successful landlords have learned is to charge below market rates which means that they have limited vacancies. You want to try to avoid all the costs associated with vacancies and turnover of tenants. The ideal is to have 100% occupancy with tenants who pay on time and look after your property. In some cases, the rental amount might be slightly lower than your mortgage repayment but it’s better than sitting on empty properties. You want to start getting your cash flow activated.
Managing Cash Flow
Having a positive cash flow is extremely important when you are running your own investment properties so that you can cover any maintenance issues that arise. Many owners make the mistake of not putting aside a large enough amount of money to cover every eventuality on the property. Never ever underestimate maintenance costs on a rental property. If you don’t have surplus cash to fix issues you could find yourself in a tricky situation.
Screening for Ideal Rental Tenants
Another big problem is seen when investment property owners don’t do the proper steps to screen prospective tenants for their Colorado rentals. They trust their gut instinct and pay a heavy price for it. You must conduct an intensive background check that investigates credit information, employment confirmation, previous landlord references, credit information and criminal and civil records. You cannot jump this vital step or you could end up with an ongoing problem with tenants who don’t look after your property, cause problems with their neighbors and never pay their rent on time.
Collecting Rent from Your Tenants
Regarding paying rent on time, many landlords allow for late rental payments and then are surprised when the tenants can’t catch up on the back payments. You need to be strict about rental collection from day one and be very clear about the eviction process in the event of late or no payments. Don’t be lenient in this regard and be sure to charge a late payment fee.
Are You Hands On With Your Properties?
Be careful not to forget about a property where tenants are paying on time and seem to be looking after the property. You must be an active manager of your investment by having regular contact with your tenants and continuous maintenance on the small issues so that they don’t escalate to larger expensive problems in the long run.
On the Right Side of the Law?
Sometimes people draw up their own lease. They can often be poorly written and leave out a vast amount of essential information. You can find great documents from companies like Nolo Press where the lease can be formulated to include the laws of the specific state where your investment property is situated. You could also purchase the relevant forms fro a realtor. The forms must not be older than 3 years and clearly state all of the responsibilities of both tenant and property owner.
Hire a Colorado Springs Investment Property Manager
If you think you have fallen into any of these problems and can’t seem to find a way through, perhaps it’s time to hire an Colorado investment property management company that can help you to protect your investment for the long run.