Going from owning one investment property to two is a big step and is the key to achieving financial independence. One rental property gets you on the ladder, but climbing the ladder is the only way to make any real passive income.
You may be inspired to take on more properties because your first property is a success. You have a great tenant, you have maintenance issues under control and the income you are receiving is a nice bump each month – maybe not as big as you’d like, but it’s nice to see all the same. Now you’ve settled into being a landlord you want to climb onto the next rung of the ladder.
When you climb the ladder, it’s like adding a second child to the family, it’s a challenge at first, but once you’ve settled into a groove, it becomes normal. It may feel overwhelming making that leap, but you’ve done it once, you can do it again. So lets walk through the biggest elements.
This is likely to be the biggest barrier when it comes to expanding your property portfolio. Taking out a mortgage is a possibility, but you are likely to get stung with extra fees, payment requirements, and approval process will likely be tougher. Make sure you research what the rules are. It’s important to have an accountant on your team that is familiar with property investing, as they will help you with finding the best way to go about it. Another option is refinancing your first investment property to fund your second, or maybe consider bringing an investor on board. Someone who doesn’t want the hassle of dealing with the property, but wants a cut of the proceeds.
Dealing with maintenance and repairs on one property is manageable, but once you start expanding your empire things start to look different. If you have two properties that are in good shape and don’t have major issues, then you’ll be busy but it’s not out of reach. However, if your properties are older and need more work, or if you add a third or fourth rental property,then it can be too much. This is especially true if you are also trying to maintain your own life! Employing the services of a property manager is a very wise move at this point. On the other hand, if you’re committed to doing it yourself for a while longer then you need good contractors. The last thing you want is for a water main to burst and you not being able to get over there to take care of it. Ask around for recommendations of contractors, they are worth their weight in gold!
Collecting the rent on time, having the right lease available, organizing open home and house inspections, paying taxes, mortgage payments …. who will be taking care of all these tasks? What about when you have 5+ properties to keep an eye on? Do you have a watertight system so nothing falls through the cracks? Make sure you have a good property management system at this point, or again think about
Along with all the above, one of the big ones is finding and keeping tenants. Without good tenants all the other aspects of managing properties becomes useless. You can’t pay the bills without tenants, so this has to be a big focus – especially initially. Finding good tenants is hard, but once they are in the property, really all it takes is being responsive to them – following up on maintenance and repairs, and staying out of their way apart from ‘Thank you’ every so often. But marketing your properties to find those tenants can take a little bit of getting used to. Once you know how to present and sell your property and choose great tenants it becomes fun. Until that point it can be a hard slog. Don’t give up too soon.
Now you know what’s involved in taking on that second rental property it’s a really good time to consider involving a property management company. One Investment property is easy to manage on your own, but once you start to expand the empire it does get more difficult. You don’t have to use property managers for everything, you can pick and choose what tasks you would like them to do for you – just ask!