I deal with it almost daily: seasoned investors who want to buy one or more homes and rent them out.  They want cash flow and good returns.  I also see second home owners who are going to retire in another five years, so they have decided to rent their property out for income to offset their mortgage, taxes, insurance, and homeowner’s association fees.  Both of these scenarios sound great, but it doesn’t always work out easily.  Here are some tips to get you through the process:

1. If it’s a true investment, understand what being a landlord really means.  Make sure you factor in repair costs and bringing the home up to a rentable condition once you own it.  That’s all going to come out of your pocket and reduce your cash-on-cash return.  If the tenants are paying you every month, that’s great; if they are not, then that will hurt your wallet.  How long can you sustain the property without rental income coming in?
2. Go for a good location.  You want a high-quality area that will attract good tenants and allow your property to have fewer vacancies. Tenants, like everyone else, want to live in the most desirable areas possible. The quicker it rents and the longer it stays rented, the easier it will be to keep your bank account full.
3. Hire someone to handle the headaches.  We have a full service property management firm and deal with the issues landlords don’t want to.  Toilets not working, A/C going out, and tenants not paying rent. Do you really want to deal with that when you are out of state?  Didn’t think so. Hire a pro to help you through it.
4. Screen tenants well.  Do credit checks, background checks, employer checks, and past rental record checks.  It’s important not to skimp on this process because one bad tenant can ruin your investment for a long time.  They could not pay rent, tie it up or even worse cause serious damage to your property.  Nobody wants to deal with those nightmares.
5. Make sure your numbers work.  It’s important to make sure your rent coming in will cover all your expenses for the property.  If you have a mortgage, get a fixed rate principal and interest mortgage.  That way if anything goes wrong a year or two down the road, you’ll be happy to know you’ll have the same payment for the life of the loan and it’s being paid down monthly.  If you can factor in a reserve account of around 10% of the monthly income, that’s even better so you can save for repairs down the road.  You will need to fix things with your property – it’s inevitable.

Gabe Mellein was voted a Top Real Estate Agent – Exceptional in Service and Overall Satisfaction by Gulfshore Life Magazine in 2012 and 2013.  He is the broker of Gulf Pointe Properties, Inc and has over 9 years experience in the SW Florida Real Estate Market.  He is a member of The Naples Area Board of Realtors, Bonita Springs – Estero Association of Realtors, Realtor Association of Greater Fort Myers and the Beach, The Florida Association of Realtors, The National Association of Realtors, and is nationally certified in Feng Shui for Real Estate.  Need real estate help?  Please contact Gabe at:  239.825.2234, Gabe@GulfPointeProperties.com  or www.GulfPointeProperties.com