Rental properties are a great way to invest your money and supplement your income. This is especially true if you are investing in the Montgomery County area. With plenty of properties to choose from in a quickly-growing region with lots of appealing amenities, owning rental property in Montgomery County will provide you a steady cash flow from the start.
But how many investment properties should you commit to owning and managing?
The answer to this question is not cut and dry. In fact, a number of factors can potentially affect how many investment properties you have in your portfolio. Thus, it is essential you evaluate your own individual situation before making a decision.
That being said, there are some general things all property owners in Montgomery County can consider when deciding the total number of rental properties they would like to purchase and manage.
Rental Property Questions To Ask Yourself
Investment properties provide excellent opportunities to build a passive income and fund things such as your bank account, vacations, or even retirement. However, there are several things to ask yourself before investing in every Montgomery County property you find matching your rental needs.
Question #1: What Are Your Big Picture Goals?
Many people want to jump right into the rental property business and start making money as soon as possible. The problem is, with no long-term goals in place, it is hard to determine how many properties are needed to meet those goals. Worse yet, not having a basic plan can ruin any goals you may have for the future. After all,
“If you fail to plan, you are planning to fail” – Benjamin Franklin
Here are some things to figure out before choosing how many rental properties to purchase:
- How will you be financing the first property you plan to purchase?
- Are you looking to supplement your income and keep a full time job, earn enough money for fancy vacations, or secure enough for an early retirement?
- How much involvement in the management of each property do you plan to invest?
- What is your exit plan should your rental property business not yield your desired results?
Question #2: How Will You Finance Future Purchases?
Getting your first Montgomery County purchase under your belt is one thing; making multiple purchases down the line is an entirely new ball game. You must have a way to finance future purchases. In the end, no matter how many properties you think you should own and manage, you must have enough money in the long term to purchase successive properties.
Here are some ways to save money in an effort to increase the number of property purchases you can make:
- Regularly evaluate your property value so you know exactly how much equity is built in
- Research your properties and only purchase ones with positive cash flow
- Get an interest-only loan and place the excess cash into a separate account as savings for your next purchase
- Continue saving money just like you did for your first rental property purchase
Question #3: How Will You Improve Loan Approvals?
Despite how many Montgomery County properties you want to own, or how much money you want to make each month, the bank has a great deal of control over what you actually do.
Bank lenders want to minimize their risk when it comes to loaning money to investors looking to purchase multiple properties. In order to continue building your portfolio, you need to improve your serviceability and prove to the bank you will pay up each month.
Here are some great ways to convince banks you will follow through on your financial obligations:
- Increase your income any way you can – take a job promotion or start a side business, and save, save, save
- Invest in positive cash flow properties – banks tend to approve loans for those receiving positive cash flow each month
- Get experienced in negotiating with lenders – present all of the reasons you will follow through on your loan obligations and why you make a good investor
Question #4: How Much Time Do You Have to Manage Multiple Properties?
If you are like many property owners, you have a full time job in addition to your involvement in the rental property business. Owning many properties can quickly become overwhelming if you choose to manage them all on your own. And, if you overexert yourself and spread yourself too thin, chances are your career and properties (including your tenants) will suffer in the long run.
If you aim to own multiple properties, but do not have a lot of time to manage them on your own, one solution is to hire Maryland’s leading property management company, Bay Management Group. The knowledgeable staff at BMG can manage every aspect related to your rental properties. This includes things such as:
- Vacancy advertisement
- Tenant screening
- Lease drafting
- 24/7 maintenance and repair services
- Regular property inspections
- Legal backup
- Strict rent collection procedures
In addition to employing the help of an experienced property management company such as Bay Management Group, you might consider partnering up with someone so that some of the tasks related to your properties are split. In addition, the finances and experience of a well-balanced partner can make your rental property business that much more successful.
In the end, the answer to the question regarding how many properties you should own and manage is this: as many as you want, as long as you are willing and able to work for it.
Everyone’s situation will differ and pose challenges along the way when it comes to purchasing multiple rental properties. However, none of these difficulties can prevent you from achieving your goals as long as you educate yourself in the rental property business, have clear goals in mind, and have a plan before jumping right in.
Additionally, you can enlist the help of Bay Management Group to take a lot of the stress of owning multiple rental properties away and make matters even easier to handle.
If you are looking to boost your Montgomery County portfolio and add more properties to increase your income, contact Bay Management Group today and see how we can help you manage your multiple rental properties, leaving you room for the fun things in life.