• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Accessibility Statement

Follow Us on FacebookFollow Us on TwitterFollow Us on InstagramFollow Us on YouTubeRSS Feed

Kimberly Howell Properties

San Antonio Real Estate

office@kimberlyhowell.com
(210) 493-6888
  • Blog
  • About Us
  • Agents
  • Buyers
    • Neighborhoods
    • Relocation Information
  • Sellers
  • Listings
    • Available Rentals
    • Homes for Sale
    • McNair Custom Homes
    • Open Houses
  • Contact
  • Rental SearchHomes for Rent
  • REALTORS®Find an Agent
  • McNair Custom HomesNew Construction
  • Property SearchHomes for Sale
You are here: Home / Renters and Landlords / Investing in Real Estate for Rental Income

Investing in Real Estate for Rental Income

May 23, 2016 by khproperties 4 Comments

Rental Income

When you’re looking to invest in real estate, particularly for rental income, you should always head into the process with as much knowledge as possible and weigh the pros and cons carefully. Rental income can be a great way to generate positive cash flow, but renters are also putting your investment through normal wear and tear and perhaps much more. There is a careful balance between a rental that continues to generate income year over year and a money pit that can negatively impact the bottom line of even the savviest investors. Going blind into real estate investments is never a good idea and today, we have a cautionary tale from one of our agents. If you’re ready to make the plunge into the world of real estate investment and are looking to generate rental income, read on and learn from other first time investor’s mistakes.

Sylvia* purchased a home with the intent to use it to generate rental income for her new venture into real estate investing. She placed an ad on Craigslist and promptly found a renter. She was overjoyed; she could now sit back and watch the money roll in! Within 6 short months, her renters had vacated the property, but not before stripping the property of appliances, light fixtures, security systems, and even the kitchen sink! Making matters worse, they used the fireplace poker to poke a single devastating hole in each of the first floor tiles (1,200 square feet of tile). Needless to say, the place was destroyed.

Trying to save money, Sylvia opted to not pay for homeowners insurance (in particular, a policy designed to cover an owner who rents their property) assuming the renter would cover everything with renter’s insurance, something she did not require in the lease. She met with the police and reported the crime, but the police were unable to assist since she had no witnesses, nor could she prove the renters had done the damage to the property. Having opted out of a homeowners insurance policy, she could make no claim for the damages or theft. The cost to repair and replace the stolen items exceeded $30,000, and the responsibility of paying that rested solely on her shoulders.

So what did Slyvia do wrong?

  • She lived 3 hours from the property and was unable to make regular checks on her property or the tenants
  • She used Craigslist to find the renters and did not do background checks, verify the tenant’s income, or run credit checks on the tenants
  • She undervalued the rent at $800/month when the average for her home in that neighborhood was $1,350/month
  • She did not insure her property against damage or theft with a comprehensive homeowners policy that included the use of her home as a rental
  • She never met the neighbors who assumed the renters were the owners, so were not suspicious when the robbery took place

What should Sylvia have done differently in order to prevent this situation? What should you do? Whether you’re new to real estate investing or just adding to your current rental portfolio, be smart and make sure you’re covering yourself and your property.

  1. Unless you live nearby and plan on routinely checking on your property, hire a property, they provide invaluable services to you as an owner:
    • Perform uniform credit and background checks on every tenant over the age of 18
    • Use regulated real estate contracts which protect both the owner and the tenant
    • Provide accurate rental rates for your property, so that you can price it correctly
    • Ensure the rent is paid and repairs are made
    • Can require renters to show proof of renters insurance
    • Renters call them with the headaches instead of waking you up in the middle of the night for emergencies
    • In the event a renter must be evicted, they take care of the necessary procedures on your behalf
  2. Always insure your property:
    • In the event of a crime, you are protected
    • In the event of an accident on the property, your liabilities are limited
    • In the event of theft or damage, you are protected
  3. Meet your neighbors! They are your eyes and ears and your first line of defense. Share with them your contact information or better yet, your property manager’s information.

Whether you’ve done it a thousand times or are just buying your first property for rental income, remember to work smarter, not harder. Real estate investing can be costly if you make the wrong mistakes, so consult with a real estate agent that has experience with investment properties or property management so that you can avoid some of the pitfalls that can come along and turn a great investment into a nightmare property.

 

* Sylvia is a fictitious name and is an amalgam of several different situations and stories.

image courtesy of Philip Taylor PT

Related Posts

  • Should You Rent Your House or Sell It?Should You Rent Your House or Sell It?
  • How to Spot Hot Markets for Real Estate InvestingHow to Spot Hot Markets for Real Estate Investing
  • What To Expect When You Buy A Fixer UpperWhat To Expect When You Buy A Fixer Upper
  • Buying a Home With a Tenant Living In ItBuying a Home With a Tenant Living In It
  • Open House at 2736 Encino RiverOpen House at 2736 Encino River

Filed Under: Renters and Landlords Tagged With: rental property, real estate investing, rental income

Quick Search

Reader Interactions

Comments

  1. Jason Hartman says

    October 17, 2016 at 5:46 AM

    I’m in Real Estate from a decade and as per my experience the most important thing to consider when you are making a big investment is to closely analyse that It’s risk ratio is not more then 50%. This will minimize the chances to get big losses.

    Reply
    • Matt Stigliano says

      October 22, 2016 at 8:40 AM

      We advise every investor to analyze their comfort level with risk and take appropriate steps to minimize their exposure to a level they feel they can handle. We have some investors who love a good risk – often the payoff is higher the greater the risk. For the average investor that’s feeling a bit more risk averse however, risk reduction becomes essential.

      Reply
  2. Sam Billing says

    July 7, 2017 at 6:29 AM

    To people who keep asking how to be a real estate investor, there are several options to consider. You can acquire property and lend to tenants for monthly cash flow. Unlike acquiring property to sell, renting provides constant income, and the investor can also sell the property after appreciation. You can also purchase property and sell after price appreciation. For people who do not want to get directly involved in property acquisition or trading, it is still possible to invest in real estate through real estate investment groups whose investments are run by experts or real estate investment trusts that involve trading in the stock market.

    Reply
    • Matt Stigliano says

      September 9, 2017 at 10:46 AM

      This sounds like it could be rather complicated, so we would definitely recommend calling a real estate attorney and discussing your options.

      Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Primary Sidebar

Why It Makes Sense to Move Before Spring

Why It Makes Sense To Move Before Spring

Spring is usually the busiest season in the housing market. Many buyers wait until then to make their move, believing it’s the best time to find a home. However, that isn’t always the case when you factor in … [Read More...] about Why It Makes Sense To Move Before Spring

Home Values

Have Home Values Hit Bottom?

Whether you’re already a homeowner or you’re looking to become one, the recent headlines about home prices may leave you with more questions than answers. News stories are talking about home prices falling, and … [Read More...] about Have Home Values Hit Bottom?

Home Equity

3 Ways You Can Use Your Home Equity

If you’re a homeowner, odds are your equity has grown significantly over the last few years as home prices skyrocketed and you made your monthly mortgage payments. Home equity builds over time and can help you … [Read More...] about 3 Ways You Can Use Your Home Equity

Best Practices for Selling Your House

3 Best Practices for Selling Your House This Year

A new year brings with it the opportunity for new experiences. If that resonates with you because you’re considering making a move, you’re likely juggling a mix of excitement over your next home and a sense of … [Read More...] about 3 Best Practices for Selling Your House This Year

Median Asking Rent

Avoid The Rental Trap This Year

If you’re a renter, you likely face an important decision every year: renew your current lease, start a new one, or buy a home. This year is no different. But before you dive too deeply into your options, it … [Read More...] about Avoid The Rental Trap This Year

Search Our Site

Real Estate Topics

  • Buying a Home
  • Homeowner Tips
  • KHP News
  • Local Events
  • Local Laws
  • Miscellaneous
  • Mortgages and Financing
  • Open Houses
  • Real Estate
  • Real Estate Market
  • Renters and Landlords
  • San Antonio Places
  • Sell Your Home
  • Technology
Our real estate agents can help you with properties anywhere in Texas. If you need assistance finding agents in other parts of the country, please contact us.

Search Homes

Explore Cities

  • Alamo Heights 56 Listings
  • Bandera 460 Listings
  • Blanco 257 Listings
  • Boerne 881 Listings
  • Bulverde 555 Listings
  • Canyon Lake 697 Listings
  • Castle Hills 31 Listings
  • Castroville 129 Listings
  • Cibolo 444 Listings
  • Comfort 69 Listings
  • Converse 719 Listings
  • Fair Oaks Ranch 58 Listings
  • Floresville 312 Listings
  • Garden Ridge 15 Listings
  • Helotes 179 Listings
  • Hill Country Village 5 Listings
  • La Vernia 255 Listings
  • Lakehills 172 Listings
  • Leon Valley 22 Listings
  • Live Oak 90 Listings
  • Mico 156 Listings
  • New Braunfels 1698 Listings
  • Olmos Park 13 Listings
  • San Antonio 12883 Listings
  • Schertz 325 Listings
  • Seguin 720 Listings
  • Selma 81 Listings
  • Shavano Park 27 Listings
  • Spring Branch 504 Listings
  • Terrell Hills 41 Listings
  • Universal City 117 Listings
  • Windcrest 43 Listings
  • Hollywood Pk 13 Listings

Stay up to date with the latest from Kimberly Howell Properties.

San Antonio real estate and property information provided by Kimberly Howell Properties. Kimberly Howell Properties does not assume any liability or responsibility for the operation or content of any of the linked resources, nor for any of the interpretations, comments, graphics, or opinions contained therein. All information deemed reliable, but not guaranteed.

KJH Properties, Inc. is a licensed real estate brokerage in the State of Texas, Equal Opportunity Employer, and supporter of the Fair Housing Act.

TREC Information About Brokerage Services | TREC Consumer Protection Notice | Privacy Policy

All content © 2009-2023 Kimberly Howell Properties, unless otherwise noted.