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How to Increase Your Number of Rental Properties Without Losing Your Mind

rental propertiesI’ve written here from time to time about the advantages of owning rental properties. Owning property that other people pay you to use is a great investment that can have significant long-term benefits. Not only do you get extra cash flowing into your monthly budget, but the diversity it brings to your investing portfolio can be very comforting. While stock markets can fluctuate wildly, property generally maintains its value over time.

There comes a time though, when you might be ready to expand the number of rental properties in your portfolio. That first one is the hardest to get. But once you get comfortable with knowing how to run a rental business and have more cash on hand, you may want to increase your number of rental properties.

That sounds like a solid plan in theory. However, with more homes comes more responsibility. The added properties can mean an uptick in maintenance costs, more time spent supervising your rental business and more headaches from problem tenants. These issues can add additional stress to your already busy life.

If this seems overwhelming and gives you pause, never fear. You can successfully add properties to your portfolio. Below are some tips for keeping you sane while building up your rental portfolio.

Do Your Homework on Rental Properties

Before you begin the process of adding a new home to your enterprise, look over your current locations. Are you actually turning a profit? Do you have the financial capability to make this new commitment? Is your business model working (i.e. are you/your team able to keep up with maintenance on your current home or houses)? Are your current tenants satisfied with your existing properties?

Those are just some of the questions you should ask yourself before taking the dive into searching for a new home. But once you’re ready to commence the search you’ll have more questions to think about. What type of neighborhood works well for you? Will people want to live in the area you are looking at? What amenities are available near the possible location? Is this an area with a high crime rate?

Although some of these questions might be second nature to you because you asked them when you bought your first property, they are worth answering again as you re-engage with the buying process. You need to ensure you are on stable ground and your ideal new location is going to be attractive prior to starting this journey.

Look at all the Numbers

Once you’ve answered the questions poised above, now it’s time to consider the finances of this new rental property. In order to stay in the green, you need to generate at least a 15% return on your investment. This means that the rent minus the debt and expenses must equal 15% or more of the money you invested into the property. Even though it sounds simple to generate a profit, consider all the expenses that go into a home, plus luxury items your tenants might want as well.

When you’ve selected a place to buy or created a spreadsheet of possible homes to purchase, plug in these expenses too:

  • Property taxes
  • Home insurance
  • Utilities and other monthly costs
  • Renovation budget
  • Monthly loan payments

An emergency fund is also a must for this list because you never know when a major problem might happen. It may only be a broken appliance. But on the other hand, you could have to deal with something like a natural disaster. Will you be ready for it?

Related Content: Emergency Fund Basics: The Step On Which All Other Success Is Built

You don’t want to fall into a money pit when you buy a property. Building out a possible expense report can help you envision what your profit margin will look like with this additional home.

Consider All of the People You Need

Yes, you will need new tenants for this property but they are not the only people you will need for a rental. You also need to have a support crew for projects associated with a home. Plumbers, electricians, landscapers, and other repair people have lots of businesses they service, and you should build a good rapport with a few individuals for problems that are out of your wheelhouse. Having a handy catalog of people to contact about specific obstacles you might not be able to handle is appealing to your renters who want problems solved quickly. This step is one of the foundational things you must do to be a successful landlord.

Related Content: How to Be a Successful Landlord: 5 Best Practices 

Finding renters might seem easy but it never really is. You need to find individuals who will pay on time and in the full amount of payment. Although you may have people lined up when you first buy a new home, chances are they’ll move out in the future. It does take time to market your rental and subsequently screen and review applications. Creating a system for finding new tenants is something you will need to build for your business. And in the case that it becomes too much for you, keep in mind that it can be delegated to a property manager.

Be Patient with Rental Properties

In conclusion, be patient with the process of adding additional rental properties to your portfolio. It’s very easy to get excited about building an “empire” of homes that could potentially support you as you move into retirement. You have time, so don’t rush.

Above all, you need to make sure the finances really work. Double the homes comes double the risk. Because this is true, it would probably be a wise move to be completely debt free on your first property before purchasing a second. If you have one property that is free and clear of a mortgage, you can put some of the monthly income from that property into paying down the mortgage of the second. You will rid yourself of the second home debt at a faster pace.

Expanding your real estate portfolio can be a daunting task. But adding more rental properties is a great way to bring in additional monthly income to your household. Be patient with the process and follow the strategies above so you don’t lose your mind while doing so.

Leave a Comment or Answer a Question Below: How difficult was it for you to purchase your first rental property? What obstacles did you have to overcome? Was there anything unexpected that you weren’t prepared for when you added your second or third property? What advice would you give to someone wanting to get into the rental property business? 

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  1. Yes!

    This is what I was looking for!

    I have been wanting to get into Real Estate investing and this article made it so much simpler.

    Thanks for making clear to me!



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