Proper Expectations and having a game plan for managing your rental property, will determine your experience and success.
Let me show you a comparison of two peoples expectations and plans for managing rental property to see how it would impact their success…
Lets look at person As expectation and management plans for owning rental property:
- Decides to buy a rental property for positive cash flow but doesn’t plan for if it ever has a negative cash flow.
- Expects to reap the benefits of appreciation but doesn’t have a clue what cycle Real estate in his/her area is in. Flat, appreciating, depreciating. Yep, real estate is cyclical.
- Expects owning rental to be completely passive. Expects to put tenants in and get rent checks like clock work. Has no plans for how to manage tenants when they have problems that effect other tenants or their ability to pay rent on time.
- Expects the tenants to treat his property with respect and care. We live in a society now where respect and care for other people is often ignored, never mind other peoples property. Has no effective plans how to take care of problems occurring from tenant irresponsibility and lack of caring for the rental property.
- Expects his owning rental property experience to be headache free. Has not created a game plan that will fit his/her lifestyle to take care of phone calls, problems and issues that may occasionally occur from owning rental property.
- Expects to reap all the benefits that only owning rental property can give with no strings attached.
Lets look at person Bs expectation and plans for owning rental property:
Decides to buy a house for positive cash flow but has plans for when and if it has a negative cash flow.
- Knows if Real Estate is trending up,down or is flat – uses that info to estimate when the rental property will appreciate and plans an exit strategy.
- Doesn’t expect owning rental property experience to be completely passive. Has plans for how to manage tenants when they have problems that effect other tenants or their ability to pay rent on time.
- Doesn’t expect the tenants to really care much at all for the care and maintenance of the rental property and understands that many tenants think every tiny thing is property owners responsibility.. In fact, expects the bare minimum from any tenant, and totally respectful, caring tenants are few and far between. Has effective plans how to take care of problems occurring from tenant irresponsibility and lack of caring for the property.
- Understands that the property is a structure in which things wear out, have life expectancies and will break. Understands that a tenants problems, especially financial problems, may cause you a headache. Has created a game plan that will fit his/her lifestyle to take care of phone calls, problems and issues that may occasionally occur from owning rental property.
- Expects to reap all the benefits that only owning real estate can give, but understands that there is no free lunches in life and is prepared to take on the challenge to reap the benefits.
Obviously the two people are going to have different experiences from investing in real estate.
Three years down the road, person A will be telling people what a nightmare owning rental property is and it’s a bad investment.
Person B may well be on their way to achieving financial freedom, bought more rental property and would tell anyone that owning rental property is a tremendous investment.
I’ve owned rental property for almost twenty years. I was totally clueless when I started. What saved me was that, I had nothing else going on. I had it in my mind that this was going to a full-time venture with one hell of a learning curve. I had the right expectations and although I had no specific plans for how to manage my property, I expected to learn and I did.
I had the expectation and the plans of “do whatever it takes to be successful at owning real estate”.
But, I realize this is far from the norm of people who decide to buy rental property. Most people decide to invest in rental property as a supplemental vehicle to help them financially.
That’s completely fine. Trust me, people don’t buy rental property for fun and ha-has. But a perspective property owner had better learn what to expect and make plans for managing the rental property if he wants to be successful at it.