A.D. Cantelmo Property Management
Our Business is Property Management in Orange County California
Always look before you leap
When people are thinking about renting out their property,
they often wonder how much work they should do to spruce up the place. Of
course all rental properties should be clean and working well, but how far do
you go to make the home more appealing to others.
The first thing you have to remember is that once you enter
the rental business, it is just that, a business and once you start a business,
you need to look at money coming in and money going out. If the money going out
is more than money coming in, you will not be in business for long. Before you
start fixing up the place, calculate how much you will be bringing in from
rents vs. your cost of fixing the place up and other fixed expenses.
Let’s take a look at an example. Let’s assume the home is
paid off.
Let’s say that your fixed cost for the property is $500 per
month. That gives you a very low monthly cost, so you can afford to fix up the
property a bit and still make some money.
You decide to paint and put in new carpet at a cost of
$4000. You do other maintenance at an additional cost of $2000, now your first
month of business; you are in the hole of $6500.
If your monthly rent is $2000, it will take you 4 months in
rent for you to break even, in this case putting a little money in the property
may make some sense, because after the 4 months you are making a nice profit each
month, But let’s change the numbers a bit and say that your fixed cost are
$1500 per month.
If you decide to invest the same amount of money into fixing
up the property, it will take you one year of rent to break even. Still not bad
when starting a business, but that assumes that nothing else goes wrong when
the Tenant moves in the property.
You can see the difference between the two rental property owners;
one is in a better position to start the business as far as making a profit,
because of the lower fixed cost. The more your fixed costs go up, the less profit
each month so you need to take that in consideration before you put money into
the property. Many times it is better to charge a lower rent for a property
that may not be in perfect condition then to fix up the property and charge a
higher rent. Many renters will tolerate a property that is lacking in certain areas
in exchange for less rent.
The important thing for the first time rental property business
owner is to make these calculations before you decide to rent out a property.
That way you are not surprised at long it may take you to make a profit.
A.D. Cantelmo Property
Management Specializes in Property Management in Orange County
Ca.