What You Need to Know Before Venturing in Rental Properties
Rental properties also require hands-on management, but unlike house flips, they have a long-term investment horizon. Any property (residential, commercial, or industrial) can be a rental property.
Property owners earn regular cash flow usually monthly in the form of rental payment from tenants. The investment can provide a steady, reliable income stream for investors, but it also requires a lot of work or delegation of responsibilities to ensure that operations are running smoothly.
First, you must find tenants for your property. This may be easy or difficult depending on your property type and available resources for finding tenants.
You are also responsible for performing background screenings for prospective tenants (if you want to) and providing legally sound lease agreement contracts with tenants.
For each month that you do not have a tenant, you miss out on income from your investment.
Once you have tenants, you have a litany of resultant duties. As the landlord, you are responsible for rent collection, property maintenance, repairs, evictions, record-keeping for the properties and ensuring legal compliance on all matters.
Depending on the number of rental properties that you own, property management can be a part-time or full-time job.
In Kenya, real estate investors who don’t want to handle the management of a property contract a property management company for a fixed or percentage fee.
This takes some weight off an investor’s shoulders, transforming the real estate into a more passive investment.
However, this tradeoff also means that an investor cedes some control of their properties and lose a portion of their monthly income.