Self Help

Avoid Big Lots: If you’re the sort of person who likes room to roam, buy yourself a house with a big lot to live in. But, if you’re an investor, avoid them like the plague. A big lot requires big maintenance. If it’s got lots of lawn and landscaping, you’ll need to hire (and pay for) a gardener to take care of it. You can’t count on the tenants to do that; after all, it’s not their yard.

The bigger the lot, the more upkeep is involved. Yet, when it comes time to resell, you’ll find that a big lot will only marginally return you any more money. In some markets, it may actually get a reduced price!

Avoid Pool Homes: There are two reasons for this: upkeep and liability. Until you have a pool, you can’t believe how much upkeep is required to be sure it’s clean and swimmable. Let a pool go, and you’ll find that algae very quickly destroys the plaster and filters, that equipment deteriorates, and that bringing it back up to par, if possible, can be very costly.

A pool is also a big liability headache. Of course, there’s always the chance that someone could fall in and drown. To protect yourself you’ll need at least a 5-foot fence with a self closing gate all the way around the pool. And you’ll need to rely on your tenants to maintain the fence and gate. Finally, the insurance to protect yourself when you own a pool home can be very costly. In addition, even if the pool is protected, unless the water is properly filtered and cleaned, there’s always the danger that a swimmer could get sick from swimming in it. You can be sure that if this happens and there’s a lawsuit, you will as owner/investor be named.

Be Careful with Condos and Co-Ops: Many people do successfully rent condos for years. However, you have to be careful with a condo and especially careful with a co-op. The reason is the HOA (home owner’s association) or the Board (of Directors). You see, all condos are part of a HOA, including any you’ll buy. And the HOA will set the rules for everything from changes you can make to the exterior to noise in the evening to where cars can be parked. Boards set similar rules for co-ops. In other words, there are lots of rules. Hence, when renting a condo or co-op expect all sorts of initial problems during the rent-up period.

Further, expect continuing problems with the HOA or Board. Although owners tend to follow the rules, if reluctantly, because they realize rules are there to keep up the overall value of the property, tenants have fewer constraints. Tenants could care less about property values, since they don’t own the property. Expect your neighbor owners to complain at the drop of a hat about your tenants’ activities. And expect to be fined and chastised by the HOA or Board over what your tenants do. There’s often a lot of hassle that you’ll have to put up with. Of course it can be well worth it in the end if you get rapid price appreciation and can refinance, cash out, or sell for a big profit.