Today’s post on Investment property is a guest post from local Boulder mortgage guru Michaela Phillips. See her information at the end of this post. A big thank you to Michaela for her excellent insights.
Purchasing real estate can be a very fruitful enterprise for investors. While flipping houses can be a risky business that requires a lot of work, investing in rental properties has the potential to provide a steady flow of profits for owners. If you’re considering buying a home, condo, or multi-unit building with the intent to lease, you need to be aware of the work that goes into managing your future property. In comparison to being a homeowner, being a landlord comes with a different set of responsibilities and benefits.
I have personal experience with managing both long and short-term rentals, so I know that each one comes with various challenges and advantages. In our real estate portfolio, my husband and I own both annual leases and temporary vacation rentals. Our properties require various levels of attention and work from us, but they have all been valuable investments.
With annual leases, landlords have important obligations that require weekly, if not daily, attention. Rather than hire an on-call property manager or live-in super, my husband handles the routine needs of our various condo units and single-family homes, which are located near our home in Boulder, as well as in Grand Junction, Colorado. He oversees maintenance issues and deals with tenants directly, which helps build positive and respectful relationships between the landlord and renters.
We offer one-year lease agreements, and many of our tenants are local college students. While some landlords are nervous about accepting student applicants, we are comfortable working with them because we know that their parents are co-signing or paying for the unit. For an added sense of security, we also require a deposit worth two-months rent upfront. In between renters moving in and out, there is about a 7-10 day gap for all necessary interior cleaning and repairs. It’s vital to work with reliable cleaners, painters, plumbers, and (if needed) electricians, who can efficiently deal with emergency or routine maintenance.
While we prefer handling our nearby properties ourselves, we plan on hiring property managers when we’re ready to retire. Our long-term goal is to pay down our mortgages aggressively so we can eliminate mortgage debt and increase cash flow, which will allow us to retire sooner.
If you’re looking to improve or strengthen your retirement fund, purchasing a property that is leasable is a great option. Vacation homes are solid assets that can be rented out seasonally or temporarily, making them valuable even when the owners are away. My husband and I have two vacation houses that we use throughout the year or offer as short term leases when we’re not enjoying them.
Our beach property in Florida not only functions as a wonderful second home, but is also a profitable investment. Since Colorado is our permanent state of residence, we hired a management company to oversee the condo as a rental, which includes advertising and finding renters, as well as cleaning and maintenance. The company charges 21% of the lease agreement for taking over landlord responsibilities and acting as the contact person for renters.
The close proximity of our second vacation home, located in Vail, Colorado, allows us to manage this investment property ourselves. Through VRBO, or Vacation Rentals by Owner, a website that connects renters with owners, we are able to work directly with vacationers interested in leasing our property. Since Vail is a major skiing destination, we rent out our house during the winter holidays and enjoy it ourselves during the summer.
Whether you’re thinking about investing in short-term or long-term rentals, it’s important to consider how much time and energy each type of place requires of you. Despite the work and effort you’ll need to put in to it, a rental property has the potential to be a gainful and secure enterprise.
Boulder Investment Property Guest Blogger Michaela Phillips
About the Author: Michaela Phillips entered the mortgage lending industry in 1994. Throughout her 20 years in the business she’s been one of the top producers for every company she’s worked for. As of late 2013, she’s the VP of Mortgage Lending for Guaranteed Rate, Inc., the 8th largest retail mortgage company in the country. Being a VP at Guaranteed Rate offers many advantages to her and her clients, unparalleled customer service, efficiency, and most importantly, competitive rates. Michaela enjoys teaching her clients the pros and cons of being a Real Estate Investor, investment property owner, and more so, watching them build their Real Estate “Empires,” large or small, but all successful. NMLS: 312874