Consider These Three Things When Investing in A Single-Family Home Rental

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Last year my husband and I finally bought a home we planned to use as our first investment property. It was a small single-family home and we input a few thousand dollars to clean it up. The sad part about it is there are things we failed to consider when we purchased this single-family home. The challenges we should’ve considered are the capital expenses, the condition of the market, and the management responsibilities. If we had considered those things I really don’t think we would’ve used our money to invest in a single-family home.

Capital Expenses

Not long after we got our first tenant to move into the home we received a call on a Friday evening that the air conditioning was not working. We had to pay for an afterhours service call and then the unit was dying so it needed replacement. The air seemed to be working fine on the days we were in the house, but the technician said it was only a matter of time. We hadn’t anticipated that expense and we were already just working towards getting the money back that we spent on prepping the home for the tenant’s move in. Unanticipated capital expenses can be a real set back. I’m not sure how big your budget would need to be before you purchase a home as a rental property, but you need to be ready for sudden big-ticket expenses.

Market Condition

As time we on we were already behind on what we invested in the property. We still had our tenant and we were getting through the rest of the year when suddenly the value of the homes in the area took a drop-in value. We were lucky in a sense that we already had our tenant because if we based the rent on the new property value we would’ve been getting way less for rent. We spent so much money to get this project going and now it looked like we were never going to break even. Which of course meant we wouldn’t profit at all on the investment. We started looking into sell my house fast.

Management Responsibilities

We knew we didn’t want to hire a third-party company or person to manage the home, so we decided to do it ourselves. Never did we imagine how many dinners or afternoons would be interrupted by the things that were happening at the home. We’ve had to meet the tenant, meet the vendor, and learn things about homes that we’ve never really cared about. It’s way more work than just collecting rent monthly. We feel like we are working double time and wondering if it’s even worth the monthly amount we’re getting from the tenant.

Conclusion

If you plan to invest in a single-family home as a rental property, do your research first and see what your responsibilities are as a landlord. Also, make sure you have additional money set aside when you get ready to purchase a place. You need a real budget to operate by, and you may want to hire a person to manage it on your behalf. So, do consider capital expenses, the condition of the market, and management responsibilities before you commit to buying a single-family home as an investment property.