Real Estate Rental Investments: Know the Costs
Tuesday, July 28th, 2009It is easy to assume you will make money on an investment property such as an apartment complex, store/mall building, or business complex and in most cases you will. What makes the difference between making a few dollars and making maximum profits is to know what the costs are going in. Your first step is to learn how to understand a cash flow statement.
A complete cash flow statement will include, not only the upfront costs of operating an investment property i.e.: cost vs. rental unit’s value but also underlying expenses such as utilities, taxes, insurance.
You should also find out the turnover in your proposed rental. If your renters are already in place, if there are vacant spaces, typical lengths of stay are all a part of knowing how reliable your investment will be. These figures are less solid than the above expenses and you should always take into account that the possibility you will have less income than the building is capable of but your fixed expenses will remain constant and save accordingly for times when rentals are under-performing.
Once you have taken all of these figures into consideration and feel a property is a good investment you are still not ready to take the plunge. Figures look good on paper but the property itself needs to look good in person. Make sure everything is in operating order unless you know ahead of time you are going to be putting money into repairs. If you are open to fixing up a property the price should definitely reflect the costs you will be putting into a building before it is up to your standards.
Now you are ready to make that jump into the rental world. When you close on your property and hold the keys, you are a landlord in an exciting new world of real estate investments knowing you’ve made all the right moves to insure security and profit.















