If you have avoided buy and hold rentals it is time to give them a second look. There should be little question that a strong portfolio of rental properties is one of the hidden secrets of long-term wealth. Instead of worrying about the pitfalls and hurdles of short-term rehabs, you can reap the benefits of rental properties years down the road. Not only can a rental give your pockets a boost in the future, they can also provide monthly cash flow as well.
Any rental property success you have is often based on the strength of your team. You need a strong core of people helping you find, finance and manage your properties. If just one of these areas is weak, you won’t maximize the bottom line. Here are five key core members that every buy and hold investor needs on their team.
- Financing: The starting point for any deal is financing. Whether you are talking about a rehab or a rental how you finance directly impacts the numbers. However, financing for a short-term property and a long-term rental are not the same. With a buy and hold rental you are looking for the lowest interest rate and the best terms. Paying hard money interest rates won’t leave you much room for cash flow. Fortunately, interest rates have slowly dipped this year and there has been little change over the past five years. Regardless of your credit profile you should have a local lender and a mortgage broker providing you with mortgage options. Local banks work best for vanilla loans and mortgage brokers with anything exotic. If you can find the right program that combines low rates with minimal down payment you can accelerate your portfolio growth.
- Wholesaler: It bears repeating that the numbers are the cornerstone of any rental property deal. As important as finding the right type of financing is, you also need to get the best price. Your purchase price, and loan amount, will determine your monthly payment, and your principal and interest. Finding deals through the MLS or a real estate agent is a popular route but should not be the only method you use. You should also find a reliable local wholesaler who may have access to deals. A good wholesaler is plugged into divorce attorneys, probate officers and other methods of finding discounted deals. They can pass these deals along to you and you can start in the property ahead of the game. Instead of fighting with other investors, or even traditional buyers, for the same deals your wholesaler can provide something exclusive to you. Exclusivity coupled with a price discount make wholesalers someone every investor should have on their team.
- General Contractor: To get the best deals you will need to do a little work. It is very rare that you will find a discounted rental property in turnkey condition. In most cases you will have to make some kind of improvement to the property. Your cost of repairs must be calculated into your purchase price and when you take ownership the work must be done asap. The longer you wait to get the work done the longer the vacancy and the less money you have coming in. You should have at least one reliable contractor who can do a variety of jobs on the property on your team. They will help provide quotes, suggest improvements and expedite the work needed to be done. When you fill your vacancy, they may be able to do any simple maintenance needed and help things run smoothly. Even the best properties with the best tenants and owners will have unexpected issues along the way. Not having to wait to fix these items helps keep your tenants happy and rent checks coming in.
- Property Manager: Don’t make the mistake of thinking you can do everything yourself with your property. Even if you can do them, it doesn’t make it a good idea. Regardless if you have a single rental or a large portfolio, everyone should consider hiring a property manager. Some properties will be too good to be true and you won’t talk to your tenants more than once a month. Other properties will be real handfuls where you will be forced to stop what you are doing a few times a week. Here is where a property manager can really justify their value. Instead of driving to the property or spending hours setting up a maintenance appointment your property manager will handle it. They will take care of vacancies, tenant disputes, maintenance requests and just about everything else in the property. All you have to worry about is finding the next property.
- Accountant: Anyone who has filed their taxes owning a rental property knows just how difficult this can be. Between all the various write offs and deductions just one rental property can be a challenge. If you have a half dozen properties it can be a real nightmare. It is essential that you have a personal accountant you can keep in constant communication. Providing any items needed over the course of the year or documenting as you go, is much easier than trying to find everything come tax time. Additionally, they will be able to provide you with advice and suggestions on how to protect your portfolio in the event of the unexpected.
Building your rental property portfolio often takes a handful of the right people. Finding these people will not only make your life easier, but it will help maximize short-and long-term profits.