Are you a landlord or looking to buy any homes for sale in Farmington Hills MI or anywhere else?

Here are over ten (10) tips for real estate investors either with or considering buying rental property that will increase your chances of making and keeping a profit with your investment property.

1. Watch your repair budget. It is easy to underestimate the cost of the repairs that will be necessary. If you do not have enough money to complete your repairs, you will not pass inspection, and you are not very likely to get a good quality tenant. You might get a few people who try to get you to agree to have them pay a lower amount of rent in exchange for them finishing the repairs for you, but that does not work very well very often. If you do not have enough cash, you no longer have control of your property.

2. Know the local rent amounts before you buy. You are making an investment to make money. However, many beginning investors only look at the purchase price and compare it to the potential selling price. If you plan to rent this, you need to know the local fair rent value. You can charge any amount of rent that you would like, but if you charge more than the neighbors have to pay, you probably will not be able to fill your vacancy. You want to make sure that the fair market rent is enough to cover your property taxes, insurance, and any loan costs that you are required to pay. Ideally, you have enough room to make a profit, too. This could save you from making a poor buying decision.

3. Pay an inspector to review the home before you buy it. Depending upon your area, it will cost you around $250 to $350 to have this done. A lot of people do not want to pay for this, especially if they do not buy the property. However, you need to have enough information to make a good estimate of your upcoming repair bill. It is much better to know before you buy a property than after you already did. It could save you from making a lousy buying decision. If you can’t afford the inspector, you probably cannot afford the investment property. Paying for an inspection will prove to be excellent self-defense.

4. Replace galvanized pipes. Take this seriously. If the property has galvanized pipes, they are old, like thirty (30) years or so. What are the chances that there will not be any problems with them? Replace the pipes and save yourself headaches later during the repair process. More importantly, save yourself from getting that call in the middle of the night that your tenant has an emergency from the pipes leaking or bursting. Plus, if you replace the pipes, you have an additional selling point. Now, you can legitimately claim that your property has "new plumbing." The house next door probably does not, which will make it a little easier for your tenant to pick your place.

5. Try not to do the repairs yourself. Pay for a professional to do it. Many beginning level investors think that they will save money by doing all of the repair work themselves. There are a few likely flaws with this thinking. First, usually it takes them a lot longer to do the repair work than it does for a professional to complete it, especially if the investor has a job. The longer it takes to complete repairs, the greater the holding costs. Holding costs are loans, taxes, and insurance. During this time, you are not receiving any rent to cover these costs. Second, a professional is less likely to overlook minor things that add to less minor, possibly major, things later. Keeping consistent with this point, catching things early in the repair process reduces the chance that you will need to redo the repair, increasing your repair cost and the amount of time before your property begins to return some of your investment.

6. Do not pay for expensive cabinets. If you plan to sell the property, my advice is different. However, if you are renting, buy the base cabinet from Lowe’s or Home Depot. Then you can use a nice stain, and the cabinets will look really nice without you spending more money than you need.

7. Use two-tone paint inside your home. It is more expensive to use two-tone interior paint than it does to paint it just one color, but most people considering renting your home will find the single paint color to be too industrial. It will help you rent your home more quickly; people often make buying decisions based on emotion, and two-tone paint will help separate your home from many others they will be able to select.

8. Resand the hardwood floor. Do not install carpet if you are renting your property to a tenant. Carpets get dirty too easily. Even if you professionally clean it, the carpet color will eventually fade. Hardwood floors are more durable and require less maintenance.

9. Have extra funds available. You need to have extra money available for two major reasons. You do not want to have more repairs that are needed than you have the cash to fix them. Then you will not be able to put a renter in your property. Also, you need to be prepared for emergencies once the tenant is living in your property. If something breaks, and you cannot fix it, what are the chances that your tenant will pay you without a fight? Pad your repair estimates, and budget a reserve fund from the rent that your tenant pays to you.

10. Do not provide appliances. If you provide appliances and they break, your tenants will expect you to fix them. If you buy a house that has appliances, just tell the renters that they can keep them. You will not pay to repair or replace them if they break.

11. If you know you will want a Section 8 Tenant, get a Section 8 inspector to visit your property mid-repair. What? Invite the inspector? It makes more sense to do this when you consider that it is easier to adjust your repair plan while you are in the middle of doing them than it is after you think you are done. Plus, it usually is less costly. Plus, it gets the Section 8 inspector working with you instead of opposing you. That never hurts!

12. Qualifying for a Section 8 tenant usually comes to only a few basic things. It is true that each inspector will do things differently. However, most concerns revolve around a few basic principles. The windows and doors need to open and close. There cannot be any peeling paint. The plugs must be grounded, having GFI in the kitchen and basement. Finally, the house does not need to be tidy, necessarily, but it needs to be clean. If you fail any of these, you have a good chance of failing the Section 8 inspection, regardless of the inspector.

13. Have specific criteria for selecting a tenant. You need predetermined criteria to select tenants to keep yourself from panicking and taking just anyone, including the wrong tenant. However, you also need to make sure that you do not leave yourself open to a potential discrimination lawsuit. You can use your own criteria, but we have a few guidelines to offer. Check their credit, because if your tenant does not pay other people, they are not very likely going to pay you. We require that their monthly salary must be two-and-a-half times the amount we decide to charge them for rent. We also do a criminal background check. We like to know who we are putting into our homes, and we try to limit the amount of potential problems we might have once the tenant moves into our properties.