of nearby homes for sale. In such neighborhoods, it may be difficult to get a tenant [who pays consistently], even if you do get a property at a low price.”
INVESTIGATE CAREFULLY BEFORE BUYING. Look closely at any property before buying. “Use the same criteria as you would when buying a house for your own residence. Have an inspector determine whether the building is structurally sound,” says Damon Dyas, a certified financial planner with American Express Financial Advisors in Southfield, Michigan. You also need to find out if the underlying grounds have any environmental liabilities.
“Be prepared for problems,” says Ellison. “Even if you inspect the property, you may eventually face issues with plumbing, electricity, or the furnace.” You should have enough capital to handle repairs so you can keep the house rented and perhaps resell at a profit in the future. Bruss says that some problems, such as peeling paint, can be corrected, but others may be permanent. “Be wary of incurable defects. If a house gets a lot of noise because it’s on a busy street, you can’t do much about it.”
PRICE IT RIGHT. Once your property is ready to be shown to prospective tenants, be sure to charge an appropriate amount of rent. “This may be an especially important issue if you move out of a house where you’ve been living and decide to rent to a relative rather than sell it,” says Dyas.
“I’ve seen instances where the property owner’s relative is not paying the fair market value. In some cases, the relative misses rent payments. Either way, they’re taking advantage of the investor,” says Dyas. “You should know what properties are renting for in your area and make sure that all of your tenants are regularly paying an appropriate amount.”
PARLAY YOUR WINNERS. The only thing better than owning a profitable piece of investment property is owning several. That’s been the philosophy of the Rosses, who now own four rental properties. “We bought our second investment property before we owned a home for ourselves,” says Michelle.
Their first property, the triplex on MontÃ©’s old block in Philadelphia, was bought for such a low price it had no mortgage. “As it gained value, we were able to borrow against it,” says MontÃ©. “We used that money to make down payments on two more similar properties.” MontÃ© picks the family’s real estate investments while Michelle handles record keeping and maintenance.
“Two of our properties are in the same neighborhood as our first one,” says MontÃ©. “We know the surroundings, and we have a certain comfort level there. When you’re buying property to rent to other people, the first thing to check is whether you’re comfortable there. If so, your tenants will feel comfortable as well.” And having rental properties in the same area makes it easier for the Rosses to manage them.
Three of the Rosses’ properties have benefited from their close proximity to Temple University. “There’s always a demand for housing from college students and faculty. In fact, MontÃ© is now looking