If you’re watching this video and reading this blog, you are probably considering the idea of becoming a landlord. Owning Indianapolis rental property can be a rewarding and lucrative experience. There are a couple of things to keep in mind prior to buying your first rental home.
1. Establish a Reserve Fund
The number one thing we can recommend is that before you make this big investment, have an account set up with at least three months of rental income.
So when a big maintenance expense hits you, or there are turnover costs to absorb, or you have to go through an eviction, you have the reserves to help you overcome those expenses.
This will make life much less stressful. It’s never a good idea to rely on January rent to pay for your January mortgage. That’s a bad position to be in as a landlord.
A reserve account will help you tremendously.
2. Prepare for Maintenance Costs
Maintenance will occur at your rental property.
It’s just an inevitable part of being a landlord. Things break and systems wear down. You’ll have turnover costs when your tenant moves out and you need to return the property to rent-ready condition. Be prepared for this cost.
About 20 percent of rental income can go towards maintenance, according to industry statistics, so it’s important to plan for maintenance costs.
3. Tenant Screening and On Time Rent Payments
There’s no guarantee that your tenant will pay rent on time every month. A good screening process prior to placing a tenant will go a long way, and companies providing property management in Indianapolis can help with that.
Unfortunately, things can happen. People lose jobs, go through divorce, and endure a debilitating sickness. All these things can create situations where rent is late occasionally, or your tenant vacates without notice, or you get to the point where you have to evict.
When that happens, you need to have a plan.