5 Tips for Accidental Landlords to Succeed as Intentional Investors

Landlords Succeeding as Intentional Investors

Landlords find themselves renting out properties for any number of reasons. Maybe you’re in the military and about to be deployed elsewhere. Rather than selling your asset, you’ve decided to keep it and rent it out. Perhaps you’ve inherited a home or you’ve decided to move and rent out the home you once lived in.

Whatever your reasons for unexpectedly becoming a landlord – welcome to the Colorado Springs rental market.

Things change quickly, and the trends in tenant preferences and legal requirements are always changing. Renting out a home is a lot more than simply finding a tenant and collecting rent. It’s an opportunity.

You can use your rental property to earn some great short-term income and to increase the value of your home and earn some impressive long-term return on investment (ROI).

But, you have to do it right.

Here are five tips we have for accidental landlords who want to succeed as intentional investors. Renting out one home could be just the beginning of a rewarding and successful real estate investment endeavor.

1. Understand the Difference Between a Landlord and an Investor

There are many differences between a landlord and an investor. Both own property and both rent that property out. But, the goals are different and usually the outcomes are as well.

Here’s what we mean.

Landlords will often insist that they do everything themselves. Does this sound like you? You’ll want to market the property and choose your own tenants. You’ll find your own lease agreement and stay in constant contact with your tenant, responding to their questions and conflicts and working with them to get rent paid and repairs made. Landlords have to know the state, local, and federal fair housing laws and follow them.

This can be a problem for several reasons, all of which come back to two important factors: time and experience. You are going to have to devote a lot of your own time to taking care of your rental property and your tenant when you’re a landlord. You’ll likely be required to make sacrifices elsewhere in your life when you decide to be a landlord and take care of your rental property on your own. You run out of time in the day. Something will be missed, even if you’re only renting out that one property with a single tenant. You still have to think about preventative maintenance and lease enforcement and rental property taxes.

Your free time vanishes and that rental income isn’t exactly passive.

There’s also the matter of experience and knowledge. As a landlord, a lot of things probably seem like common sense. When your property is vacant, you find a tenant. When a sink is leaking, you send over a plumber. However, to be an effective landlord, you’ll need to know more and stay on top of changing laws, requirements, and best practices. There are a lot of laws to work with, from federal laws such as the Fair Housing Act to state and local laws that govern security deposits. If you don’t know what the laws are, you can find yourself getting into some expensive legal trouble, and that’s going to hurt you.

An investor is different. Investors treat rental properties like a business. If you can shift your mindset to that of an investor, your odds for success will increase dramatically. Investors surround themselves with experts, protecting their time and their assets.

2. Hire Professional Colorado Springs Property Managers

While a landlord will do everything themselves, an investor will immediately hire a local management company. This will help with a number of things:

  • You spend less time managing your property.

  • You avoid costly mistakes.

  • You keep costs down with lower vacancy rates and access to cost-effective vendors.

  • You have a team of experienced professionals helping you make smart decisions.

Working with a management company doesn’t mean you’re giving up control of your rental property. It means you’re stepping back from the potential emotional entanglements and day-to-day frustrations and leaving it in the hands of experts. It’s a better business decision and as we noted, investors treat their properties like businesses.

3. Investors Know Their Numbers

When you want to transition from landlord to investor, you have to know what you’re working with financially, and how even small changes such as a refinance or a kitchen upgrade will affect your rental value, your cash flow, and your ROI.

Numbers are important when you’re investing in rental property. For example, maybe you will expect a higher rent than the market will allow. If you hold out thinking that you’ll get your higher rent, the property is going to remain vacant for much longer. You need to understand how rental values are established and what kind of impact the market has on what you earn.

Your Colorado Springs property management company can perform a rental market analysis and let you know the starting point for any investment you’re thinking of making. The market changes from season to season and even from month to month. If you want a certain rental amount and you’re unwilling to be flexible, you might find it difficult to be successful as an investor. You’ll have no rent coming in, and your numbers are not going to look good.

When it comes to budgeting, you have to be prepared for both fixed and variable expenses. When we say investors know their numbers, we mean they know all their numbers and they have good data to provide estimates for those numbers that are unknown. You’ll never know how much you’ll spend in maintenance in a given year, but you do know that if you put away 10 percent of your rental income every month, you’ll be covered for any unexpected costs.

Landlords aren’t thinking ahead to new acquisitions. Investors are. To be a successful investor in Colorado Springs, don’t buy another rental property until you know what the numbers will look like. How much will you spend and how much will you earn? Put together a team of professionals to give you advice, resources, and support. And remember – you’re running a business.

4. Investors Understand the Importance of Relationships and Networking

As an accidental landlord, you may not think about real estate networks and professional development. You’re just renting out a house. However, if you want to move towards an investor model, you’re going to have to build a network. We don’t know any real estate investors who are successful on their own from a bubble. You need to put together a community of like-minded people who can help you reach your investment goals more effectively and efficiently.

Successful investors work with property managers, brokers, real estate agents, mortgage lenders, attorneys, maintenance contractors, accountants, and landscapers. Get to know the people who are moving in real estate circles and working with investment properties every day. These are the communities that will share news, offer tips and advice, and maybe even lead you to your next opportunity.

There are a lot of great platforms online, but don’t forget the value of local, in-person professional organizations and associations. Business groups and community service organizations can introduce you to a diverse network of people you’ll want to work with. This is something every good investor knows.

5. Real Estate Investing is a Long-Term Endeavor

Finally, don’t try to get rich quick.

As a landlord, you may find yourself hearing success stories that seem unbelievable – people paying off their house in a year or making a million on their first real estate investment. If they seem unbelievable, they probably are.

Real estate requires long term investment strategies. In past markets, buying and flipping homes has worked out well for some people. But buying and holding rental homes is the best way to earn wealth. Don’t rush into deals that come with huge promises. Don’t step away from your investment goals because someone is doing a hard sell on something that’s “guaranteed” to make you money.

Take your time and decide where you want to invest, what you want to invest in, and why. You’re going to earn some great financial rewards as a real estate investor as long as you’re working smart and staying consistent. There’s a lot of opportunity in Colorado Springs and the surrounding areas for investors, even new investors who started off by renting out a single home. Don’t rush it and don’t think you’re going to earn more than you are on day one. You aren’t.

These are five of the best tips we have for landlords who are looking to do something bigger with their rental properties. Owning just one piece of real estate gives you a lot of leverage.

If you have any questions about how to transition from accidental landlord to intentional investor, we’d love to help you strategize and set some investment goals.

Please contact us at Empower Realty Team. We lease, manage, and maintain investment properties in Colorado Springs, Monument, Castle Rock, Parker, and Aurora.

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