5 Ways to Plan for a St. Louis Rental Property Investment
Many St. Louis property owners are starting to make the jump into buying rental properties. With an ideal location, an up-to-date St. Louis rental property, and a wonderful tenant an owner can make money from a rental property.
On the other hand, there are always problems with St. Louis rental properties. A smart landlord will consider all angles possible before making the financial leap in buying a potential money pit.
Research Rentals
Many St. Louis homeowners feel like they know what it will be like to be a landlord. They have taken care of their property over the years, so it should not be too different to take care of a rental. Unfortunately, rental properties are an entirely different beast. Any investment in one is a risk since the down payment of that property may not be seen for years to come.
Even if there is a property manager the owner should still be aware their presence is needed. There will be problems that come up that the manager will not be able to handle alone. The best way to have a great St. Louis rental property is to take the time to buy the right house. Look for something that will not need updating or repairs in the near future to allow for some financial stability to be gained.
Hire Professionals
While paying someone else out of the profits from a St. Louis rental seems counterproductive, it can make a landlord’s life easier.
A property manager will typically get paid 10% of the rent for a house. The great thing about having a manager is that they can handle a lot of the legwork for a landlord and just call them if there are any questions. They will handle complaints, find tenants, and even hire help in fixing issues with the property.
Interview Tenants
It can be tempting to take any tenant and put them into a rental. Cash flow is important when renting, but a great tenant is also vital. A bad tenant can end up costing a landlord money. The damage done to a property can greatly outweigh any money that has been made from rent.
A great tenant will cause fewer problems and cost the landlord less money overall. Be sure to screen applications and really think about the choice in what tenant to rent to.
Return on Investment
No one rents a house because they think it is fun. The goal is to make money on the St. Louis property.
The cash flow is the money that is left over when all essentials are paid for. That means taxes, property upkeep, and the mortgage. If a property is going to break even, there is no point in investing. If a crisis comes along and there is no cash to help fund the repairs than the property is going to cost the landlord money.
When thinking about cash flow try to find the best estimates. If there is little access to information like how much utilities will be, always overestimate. Never assume someone is going to be frugal with energy or water usage. Your tenant will not think about the landlord when they are using utilities unless they are paying that bill.
Expect the Unexpected
Any landlord knows that when something goes wrong, it really goes wrong. Their St. Louis rental property may be making them money for the first three months, until unexpected expenses pop-up.
When thinking about expenses look at the big pictures. Do not expect that the profits from a house will always cover any expense. Plan it out and know what every problem will cost to fix.
Consider lawn care, general upkeep, and the possibility that major appliances may need fixed or replaced. It is best to keep money in reserve for problems that are more than the cash flow that is available. Any major problem neglected by a landlord is going to lead to an unhappy tenant.
The startup of a St. Louis rental can cost more than is comfortable for some owners. This is the initial investment and it can take a while for the landlord to see a return on this money. However, when planned properly, renting out a St. Louis property can be a lucrative business.