We’re on the topic of property management and how to manage a property that you no longer occupy. It’s a great way to start a passive source of income.
Featuring:
Bob Nelson, Eugene real estate investment broker
Marcia Edwards, Eugene residential real estate broker
Marcia Edwards: A lot of first-time buyers are trying to get enough momentum to not sell their first home but instead rent it out. A great opportunity, I think that’s good foresight.
Bob Nelson: Well, what happens, of course, is your net worth is increasing as the property value increases, and if you can find a tenant that would make a payment that’s large enough to cover the taxes, insurance, maintenance, repair, and the mortgage payment and a little extra, that’s cash flow to you.
Marcia Edwards: And it’s been the case recently. There’s been an opportunity there where the interest rates have stayed competitive for investment property, and you’ve also got the opportunity of rents that are appealing for income sources. However, I want to talk to the point of those who are self-managing, especially the single family residence. It’s something you want to try to do to save a nickel, but we’ve seen that backfire.
Bob Nelson: Well, save a nickel, cost yourself a dollar. The idea of under renting so you never have a vacancy factor. Guess what? It’s a form of vacancy factor. It’s called lost a lease. The fact that I have under rented when it could’ve been rented at a, legally, a higher number, that’s the equivalency of a vacancy factor, to that extent.
Marcia Edwards: Not even just that. What you’ve got is you’ve something that’s generating less than it could performing lower than you would expect it should, and what you do when you go to sell it is you have to reflect the actual income you’ve produced. You can say, “Oh it’s under rented by 150 a month.” That means nothing to a potential buyer. They’re going to be looking at your books and saying, “I’m going to price my purchase price on that actual rental income.”
Bob Nelson: Well, they pretty much have to with the current rent controls in place. It may take quite a while at a process of increasing your rent at potentially 10% over whatever the last rent had been. It may take you a while, several years to catch up to the market, and that’s a bumpy situation.
Marcia Edwards: But get started with professional management, get on the right track because most real estate investment is a long-term commitment and a long-term investment. And if it is, do the right thing and have people move it forward at the rate they should to keep up with the market for you.
Bob Nelson: Well, it’s not just that. It’s also a buffer between you and the tenant, not that I need to be buffered, but it’s a situation that makes it much, much more comfortable.
Join Eugene, Oregon, real estate experts: Bob Nelson, Real Estate Investment Broker with Pacwest Real Estate Investments, and Marcia Edwards, Residential Real Estate Broker with Windermere Real Estate, daily at 5:30 on KPNW for the “Real Estate Today” radio show.
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