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The reason so many
owners don't have the degree of success they hope for is they neglect
to fully include all the cost associated with owning rental housing. When
looking at a prospective property on paper there often appears to be a
lot more cash flow than there is in reality.
Why? Most novice
buyers underestimate true operating cost and the amount of time needed
to properly run rental properties. Some are misled by sellers, others
by their own desire to own property.
In lower income
neighborhoods figure $100 to $125 per unit per month in real maintenance
cost. In middle-income housing figure $35-50. Oh, you will sail along
for months without any cost and then one day a sewer will collapse and
you have to shell out 5 grand or your formerly ideal tenant will vacate
without notice leaving a thousand dollars worth of damage and $800 in
rent due.
You will try to
tell me that your maintenance cost won't be so high. After all you do
all the work yourself. Does this mean you are willing to unstop someone
else's toilet for free? But even if you are willing to work for free,
doing it yourself is not without cost. You decide to fix the trashed
unit because there is little money left after paying the bills with
that empty unit. Cant go tomorrow cause little Jessica has her dance
recital, but I hit it hard over the weekend. Weekend comes after a long
week. Even if you do go, you are not productive. Soon that one-week
to prep the trashed unit turns into a two and a half month ordeal. The
rent you lost would have more than paid for having someone else do the
prep, let alone all the time you spent.
Perhaps it isn't
the maintenance per se but the toilet that was running for 3 months
and you only realized it when the bill for a thousand dollars showed
up in the mail box.
Over the 25 years
plus I have been in this business the single thing I would have changed
in the early years would have been to hire employees sooner and contract
out more work than I did. The return on the time I spent doing things
that I could reasonably hire out and the lost opportunities because
it just don't work out. And I was working for a remodeling contractor
at the time so I had more of these mechanical skills than most.
The rental housing
business is often intense and certainly not a spectator sport. It is
not for everyone. But if you buy right, stay at it when all others would
quit and hire out more work than you think you should you can make it
succeed.
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