If you’re a novice Portland rental property investor, you probably know that you have a lot to learn.
You also have a lot to gain.
There’s an opportunity to establish financial security and even build wealth when you invest in real estate, especially rental real estate. If you’re smart about your investment strategies and you choose the right professional partners, you can have a successful investment experience, even as a novice.
We love working with new investors because it gives us the opportunity to share our expertise and our resources. As experienced Portland property managers, we know what types of properties will rent for the most money and which properties will only be a financial drain. We’re happy to share what we know with you.
To get started, here are five of the best business tips we can offer to novice investors who are exploring their options with Portland real estate.
1. Establish Your Portland Real Estate Investment Goals
First, you’ll need to know what your investment strategy is and how much you can spend on a rental property. This is the business tip we always start with because it’s alarming how many new investors skip this part of the process altogether and just go looking for available properties to buy.
Don’t buy anything without knowing how and why it fits into your investment strategy.
Buy the property that fits your investment goals and if you aren’t sure what those goals are - that’s where you need to start.
We have helped novice investors who weren’t sure how to even establish their investment goals. Here’s how we can help - ask yourself these questions:
Are you hoping to earn immediate cash flow?
Are you more interested in appreciation?
Are you buying a rental property you plan to live in yourself one day as a retirement home or is this strictly an income property that you or your family members will never occupy?
Do you like the idea of residential or commercial property? Long-term or short-term leases?
These are some of the immediate questions you’ll have to ask before you invest. It will shape what you buy and in which Portland neighborhoods you decide to look.
Something useful to know is that you’ll have to invest more than money. You also have to invest time and resources if you want to build the kind of wealth that real estate promises.
You also have to prepare to invest for the long term, so make long-term plans. You may intend to start with one property, but can you eventually buy and hold a few properties and pay off the mortgages in a relatively short period of time? Or, will you be willing to take on more debt and leverage your additional single-family home investments to grow a larger portfolio over the next five, ten, or twenty years?
You’ll want to stay somewhat flexible because the market is in an unusual space right now and it can always change. Your investment property will perform differently from year to year. Be prepared to make the necessary decisions when the times come. The investment goals are not meant to be permanent - they’ll change with your needs and priorities. They’ll change, surely, with the market.
Financing is another early part of the equation and is an issue that should also be informed by your investment goals. Some of the questions you should ask before acquiring a rental property or finding the means to pay for it are:
How much do you have for a down payment?
What will you do to finance the rest of the purchase?
How much risk can you tolerate?
Do you have the available cash to spend on things like repairs, vacancies, and marketing?
Not a lot of novice investors pay in cash. You’ll need to be prepared to budget for the expenses that come with owning a rental property.
2. Treat Portland Real Estate Investments like a Business
Business. That’s the advice we’re giving you - build a business by treating this like a business. Real estate can easily become emotional, especially for new investors.
You have to detach from the property emotionally. In fact, do what you can to detach from the process if things become overwhelming and stressful. There are plenty of experts who are willing to help, and they’re not going to have the emotional connection that you do to an investment. Remember that this property is not a home to be occupied; it’s an investment with a single purpose: to earn money.
This is a business. Treat it like one.
This is possibly the best advice you’ll hear.
3. Develop an Understanding of the Portland Rental Market
Research the rental market in Portland, and get to know the way things shift from neighborhood to neighborhood. This will help you decide what type of property to buy and where to buy it. There are likely to be nuances and trends in each section of town, and those little differences aren’t always going to make sense. One home can have a vastly different rental value from another home that’s simply across the street and in a different school district.
As you familiarize yourself with the market, make sure you’re also getting to know the federal, state, and local rental laws that require compliance. It’s impossible for a novice investor to know everything about the Portland market and its rental laws, but at least understanding the rental values, maintenance expenses, and vacancy rates for an area will help with budgeting and forecasting. Getting to know the fair housing requirements, the security deposit laws, and the rent control regulations will help you prepare for an organized and compliant tenancy.
You’ll also have to invest in the right Portland rental property. That’s why there’s so much value in learning about the market as a novice investor.
You have to know what you’re looking for, and what’s going to earn you the best ROI. You also need to consider how the property will fit your investment goals. It has to make sense mathematically. Consider your prospective tenants, who will be looking for a well-maintained home in a desirable neighborhood.
It’s easy to get drawn into the idea of buying a cheap property that needs a lot of work. This is a strategy that may have some merits for more experienced investors, but it’s not a great way to start your real estate investing career. The rehab that’s needed means there will be a delay in getting that property listed on the market. You’ll have to invest more money to make the necessary renovations and repairs, and you won’t have rent coming in for several months. It can be difficult to get started this way.
Buy the right rental by doing a lot of research before you close on the deal. Get to know the rental value, the likely tenant demographics, the local economy, and the location. These things will impact what you earn and what type of investment experience you have.
4. Money Matters: Income and Expenses
As a business person preparing to invest in rental property, you naturally need to know what you’ll be earning and spending in both the short term and the long term. This is important math, and while you cannot know exactly what your rent will be or your maintenance expenses, you can make some important estimates that will help you decide what to buy.
Pricing Your Portland Rental Property for High Earnings
New investors are often confused about how to price their rental property. You may have an idea about what you’d like your property to earn every month, but the rental price is really market-driven. It doesn’t matter how much cash flow you’re after or what you’ll need to make your mortgage and tax payments.
Don’t expect to see positive cash flow from your Portland rental property right away. It’s going to take some time. If you try to price your rental home at a point that you’ll earn a profit every month, you’re going to run into several different roadblocks, the first of which is a long and expensive vacancy period.
Prepare for Fixed and Variable Costs and Budget Accordingly
You’ll know what you can expect to spend on your mortgage, insurance, taxes, and even services like pest control and landscaping. The unknown costs must be budgeted for as well. Maintenance is the best example of a variable investment expense.
Every rental property will need work, especially once you have tenants in place. Wear and tear is going to occur, and systems and appliances will need to be repaired and replaced.
Prepare for this financially, and make sure that routine and emergency maintenance issues are a priority for you and your tenants. Any deferred maintenance or maintenance that’s left unreported by your tenants will damage the home and drag down its value.
5. Invest in Professional Portland Property Management
Unless you have the time, knowledge, and experience to manage an income-producing property on your own, hire a professional Portland property manager for your real estate investments. You need someone who knows the local market and understands the property management industry. Find a company that can accurately price the home, market it, and screen for highly qualified tenants.
Smart investors understand the value of Portland property management. Let’s talk about it. Please contact us at PropM, Inc. Unlike most Portland property management companies, we are here for you 365 days a year and seven days a week.