Real estate investing can provide a steady source of passive income while you build the value of your assets and overall wealth. But when your professional or personal commitments already leave you wishing for more hours in a day than are available, it’s hard to imagine how you’ll ever find the time to add real estate investing to your busy schedule.
Here are six tips to reduce some of the time commitment associated with real estate investing.
Rely on experts to find investment properties. A lucrative real estate investment may take time to find, and you can’t rely on a single factor — such as the property’s price, location, school system or appearance — to determine if it will prove to be a smart investment. Establish an ongoing relationship with realtors who are well-versed in real estate investing in the areas you’re considering purchasing. They can scout and tour properties on your behalf and manage the initial vetting process. Additionally, real estate agents have access to the MLS, an online database that provides valuable information on all the listed properties in the area.
The best part of working with realtors to find projects is that it doesn’t cost you a dime. Realtors take their commission from the sellers, so you don’t have to pay commission on the properties they find – although if you want your contacts to keep looking for properties, you’ll want to use the agent who found the house when you sell. Not only are these professionals experts in the local market, but they are also incentivized to maintain a relationship with you because you can provide them with a steady flow of sales – something a traditional home owner can’t offer.
Look for properties with proven success. You can reduce time, energy and money finding tenants for a real estate investment property if you purchase one that is already occupied, under a lease whose terms you would be comfortable continuing (assuming the current tenants want to renew when it expires). In addition to giving you the ability to ask the seller for information related to what types of expenses and income you can expect for the property before you buy, you’ll have insights into what the market will bear in terms of the lease terms, monthly rent and potential sales price.
Find reliable professionals and stick with them. If you know other investors, ask them for recommendations so that you don’t have to waste time testing new contractors or realtors. If you don’t, make sure you set up interviews with potential hires and ask multiple contractors for estimates on your scope of work. The more effort you put into the hiring process, the less you need to put into the project later.
It may be tempting to choose the cheapest offer for your investment, but this is not where you should be skimping. Effective, experienced contractors can make or break an investment project; hiring someone new and inexperienced may save money in the beginning, but it will cost you in the end. Establish strong relationships with a team of experts who can advise you on how much time and money a potential investment property will require. As you build trust, you can let them manage some of the smaller aspects of your project for you – like approving bathroom tiles or paint colors. The longer you work together, the more they will want you to succeed and be willing to help you out.
Partner up. While working with other investors can be tough, going in with a partner or two makes part-time real estate investment far more manageable. If there is a problem, having multiple people at the head of your project increases the likelihood that one of you will be able to make the time to deal with it immediately. Finding partners is especially helpful for your first few deals because the responsibility and liability will be split amongst you. As with any investment, it is possible that you will lose money in real estate, and that chance is higher when you are unable to dedicate your full attention to your fix and flip or rental investment. Working with others will increase your success rate and mitigate your losses in case of failure.
Hire a property management company. Even the most attractive rental properties will demand your occasional involvement, whether for a minor issue such as a clogged drain, a major roof repair, or basic home maintenance to keep the major systems and appliances running efficiently. If you do not have the time make calls to find a professional who can make emergency or maintenance repairs, or the time or means to travel to the property to provide that person access when tenants aren’t willing or able, securing the help of a property management company can be an invaluable investment. While property management companies vary in the types of service they provide (and what each costs), many will allow you to establish the terms of the agreement in terms of what types of repairs require your authorization, and which they will handle without your involvement. If you don’t want to screen tenants, collect rent or manage the responsibilities of tenant move-out and move-in, many property management companies will also handle this important aspect of real estate investing on your behalf (for a fee). Securing the help of a property management company may reduce your monthly profit a bit, but remember that you may be able to deduct those costs when reporting your real estate investment’s financials on your annual tax return.
Stay close to home. No matter how effective your real estate agent, contractors, and property managers are, you will still need to visit any investment property from time to time. You need to see the property to approve the scope of work, to check that rehab is progressing as planned, and to deal with any major setbacks that will inevitably arise if you work in real estate investment long enough. Focusing on projects within an hour of your own home will cut down travel time and make it easier for you to judge the value of an investment.
Ready to find time in your busy schedule to start investing in real estate? Contact Asset Based Lending today and find out about our many financing options for real estate investors on the East Coast.