Make your real estate
investment a success

THERE ARE three keys to a
successful investment in res-
idential real estate.

The first priority is to buy
the right property for the
right price. Then the financ-
ing and tax consequences
must be structured properly
to maximize the return on
the investment.

Last, but not least, after
the property has been ac-
quired, it must be carefully
managed.

If your investment is going
to bear fruit, you must select
the right tenants, control
costs and protect the value
of your investments,

If it is one of many in-
come-producing homes’ you
have on the go, you may
want to investigate the pos-
sibility of having a property
Management company han-
dling your investments...

However, as a first-time
investor, it may be wiser anid
more practical to manage the
property by yourself. You
not only save the cost of hir-
ing a property manager, you
also gain valuable experi-
ence.

Whatever calculations you
used to arrive at your valua-
tion will now be put to the
test as you monitor. your in-
come and expenses.

It’s a good idea to review
the origina! pro forma or in-
vestment analysis you
prepared for the property on
a regular basis, so you can
make sure your projections
of expenses, uet operating
income, and cash flow are
still accurate.

Expense statements should
include annual costs suct: as
insurance, property taxes,
etc. Many people make the
mistake of only doing a
one-year analysis when they
purchase the property and
never extending it beyond
year one.

You should be able to do
your own bookkeeping — it
doesn’t have to be complex
as long as it is understan-
dable to you.

At least once a_ year,
review the rents for proper-
ties that are comparable to
your unit so that the rent
you’re charging is at the cur-
rent market level. If you let
your rent fall behind, it can
be difficult to try and catch
it up all at once.

You'll meet significant te-
nant resistance, and rent leg-
islation limits the amount
rents can be increased. If
your rent(s) are below mar-
ket value, so is the value of
your building.

The tenants -vho occupy

your rental units can be the
difference between a good
investment that leaves you
with peace of mind and a
disaster that costs nothing
but money and aggravation.
Selecting good tenants re-
quires a little extra time to
meet and’ interview them,
and then following up to
check their references and
credit, but it's time well
spent.

Although not all landlords
agree, a strong case can be
made for keeping your
property well-maintained,
One of the most important
factors in your investment is
equity appreciation, and a
property in good repair will
command a_ higher price
than one that needs a lot of
work.

In many cases, any capital
spent to maintain a property
is more than returned at
resale time.

Keeping the property in
good shape also tends to
produce better tenants. You
don’t need the problem of
high tenant turnover and
you don’t want to develop
an adversarial relationship
with your tenants.

(Courtesy of Royal LePage
Residential Real Estate Ser-
vices)

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