If you have been around these blogs or our INDY REI podcast for any length of time, you know that we preach loudly: treat your investment properties like a small business.
We don’t see this as our opinion, because after 20+ years in the industry, we guarantee your chances of success are exponentially higher when you treat investing like a business and not a hobby.
Why?
Simple: Like most things in life, you get out what you put in.
In this blog post, we’ll explore the importance of treating investment properties as a serious business. The key things you need to make that business thrive, and how to consolidate all these different players.
Mindset Shift: From Hobby to Business
One of the biggest mind shifts, especially for our new investors, is recognizing the need for professionalism. This is not a “I will get to it when I get to it,” venture.
This isn’t a hobby, and whether you are self-managing or using a PM, there will be times you need to be reached and you need to make decisions in a timely manner.
If you are looking for something that is a 9-5, then this may not be for you. There will be some weird and some long hours. It is not a typical hobby where you can just spend your free time with it.
Maybe even more important: if you are looking for soemthing that guantees a monthly return or even gaurantees that you won’t lose money, real estate may not be the best area to place your money.
Oftentimes, the biggest hurdle for investors converting their primary residence is letting go of the sentiment of this being your home. You must shift that mindset to this is my investment, my business, my financial future.
Day-to-Day Management
Day-to-day operations require attention for any business. So how can you be successful when also juggling a family, full-time job, and hobbies?
Be prepared for anything.
Taking the initiative to pre-vet contractors, have a sound system in place for maintenance requests, checking your lease’s viability before use, etc, etc.
Do the prep work.
Put time into setting up your business well. Then, when you have an emergency maintenance issue at 2 am you’re not scrambling- you’re prepared.
And if you are an investor with a family, a job, a life outside of this investment- then this planning is paramount for your success.
It can also be paramount to your bottom line. When scrambling, you are more likely to lose money by making mistakes, hiring the wrong people, etc.
Financial Management
Effective financial management is the bedrock of successful businesses, and investment properties are no exception.
Adopt a meticulous approach to financial planning, budgeting, and tracking expenses. There are plenty of cheap-ish softwares that can make this easier. Be sure to plan for vacancy and to plan for maintenance. The age of your home will have a big impact on your maintenance costs.
Establish a dedicated business bank account for your property investments to maintain financial clarity and ensure that decisions are grounded in a solid understanding of your cash flow.
Beyond this, be certain to create a SWAN account (Sleep Well at Night) with a reserve of at least 6 months of rent, safeguarding against unexpected expenses and preventing the use of current month’s rent to cover that month’s mortgage.
Tenant Screening
We recently talked a lot about tenant screening in our podcast, “How Savvy Landlords Fight Rental Fraud.”
And in short, no one is immune to scammers. From the biggest PM companies, to the landlord with one property, if you haven’t been scammed, it is not a game of if- but when.
We have always recommend to have extremely tight measure in place for your screening process.
The first time you lease based on a feeling, don’t run a credit check, etc, you are no longer treating your investment like a business.
So take tenant screening seriously. You should follow the same application process every. single. time.
For a step by step list on how to make sure for process is fraud-proof, check out our blog: Indianapolis Property Management How To: Tenant Screening.
Marketing
Every business needs some type of marketing, whether that is word of mouth or billboards lining the interstate.
At the very least, you will need a marketing budget to attract new tenants when needed. Posting on Zillow, or any property listing site is great start. If you have more than a couple of properties, you may even want a website or some online advertisements to limit vacancy.
At the very least, use marketing as a tool to ensure you’re not using profit from busy seasons to fund slow seasons.
Continuous Education
Our top recommendation for treating your investment like a small-business it to stay invested. Keep tabs on the market, learn what similar properties are going for, and have a pulse on that area.
Your biggest tool for investment is market knowledge, and this is something we stand by.
By keeping up with the local market news, subscribing to a local Investing blog(Here is our obvious choice for Indy Clients), or just checking other on other similar homes’ rates, you are making informed choices about your investment- and that will leverage success.
Ask For Help
Treating your investment properties like a business and not a hobby means you will run into problems. You will run into big problems you will not know how to fix.
This is when you need to ask for help.
In a hobby, it’s typically low stakes if you mess up. In investing, your financial future it on the line. If you don’t know or are unsure ask a trusted mentor or someone in the market.
We also recommend you check out our podcast: The Top 11 Team Members for Your Real Estate Dream Team.
And if all of this seems like simply too much, we are to here to be your one-stop-shop for property management.
We can handle almost all of the factors listed above. All we need is the mindset that this is your business, and we can help it succeed.
In Conclusion
In conclusion, treating investment properties as a serious business rather than a hobby is not just a mindset; it’s a comprehensive approach to success. By embracing professionalism, implementing sound financial practices, investing in strategic marketing, and committing to continuous education, property owners can attract and retain quality tenants and make financially savvy moves for years to come.
