Diversifying your rental property investments over several properties, preferably in diverse locations, is just what Jason Hartman recommends to keep your assets safe if one market collapses. Some of the best deals can be found outside your state. But owning properties like these can create new challenges for day-to-day property management.
Many investors purchasing out of state rental properties opt to hire a property management company rather than take on the “job” of being a hands-on real estate entrepreneur. While there are advantages to using property managers for out of state holdings, these managers can be expensive, and you may miss out on some tax breaks for hands on management if you use them. But with a phone, the Internet, and clear expectations about the responsibilities of your tenants, you can manage your own properties, even from a distance.
If possible, select self-sufficient tenants that plan to rent the property long-term. Some renters may already be in place when you buy the property, especially if the purchase in question is a duplex or other multiplex. But since these tenants will be assuming more responsibility toward the property than usual, it’s important to have renters in place that can “co-manage” the property with you.
Although you can’t violate the provisions of the Fair Housing Act when screening tenants, you can perform thorough credit and reference checks, and avoid those with destructive pets or other risky profiles, or anyone who’s moved frequently. The goal is to fill your property with tenants who are as self-sustaining as possible.
Create a strong, unambiguous lease that makes it clear that tenants must be responsible for most repairs. This could include an expectation that they arrange for the repairs and are reimbursed by you, or that you charge a lower rent in exchange for the tenant assuming this responsibility. Another option is to make the tenant responsible for finding a replacement tenant if they break the lease, or by charging a fee for doing so. Real estate attorneys and advisers can help you craft a lease that reflects your expectations.
Other maintenance issues such as ongoing property upkeep can be handled by contracting with the appropriate companies, such as landscapers. Most business related to the property or properties can be conducted by phone and online from your home office. And, like most expenses related to managing your investments, travel to and from your property is tax-deductible.
Investing in rental income property offers financial freedom, as well as relief from some of the concerns of the working world such as job insecurity and eroding pension plans. Managing your investments yourself, as Jason Hartman advises, is another way to create freedom and save some money as well. (Top image: Flickr | iShane)
The Jason Hartman Team
