As a property investor, it's no secret that you might have faced your fair share of challenges within the rental market in recent years. One of these is the rapid fall in rental costs. Over the past two years, studio, one-bedroom, and two-bedroom rentals have decreased by over $50.
As a rental owner, this is not ideal, but that doesn't mean you have to take a major loss on your investment. With the right rental valuation strategy, you can still attract the right type of tenants and bank a decent return.
With that said, here are the rental valuation myths you shouldn't buy into.
Myth #1: Your Rent is Enough to Cover Your Overheads
Most people assume that the purpose of the rent you collect is to cover your monthly mortgage payments. If you're new to the world of Kansas City real estate, don't make the mistake of assuming this, too.
You simply cannot count on your tenants to cover your mortgage payments. They might fall behind on rent, pay their rent late, or your property might be vacant for a few months. There are also the added costs of insurance, taxes, and maintenance expenses that need to be covered.
Don't fall into the trap of assuming your rent is enough to cover your expenses. Always have a financial buffer of some kind. This is especially important in the early years of property ownership when a large portion of money goes into paying interest on your loan.
Myth #2: Owning Property is Hands-Off, Passive Income
Another rental property pricing myth is that owning a property is the best form of hands-off passive income. This couldn't be more inaccurate.
Rental property management does not revolve around rent collection, and rent collection alone. There is so much more that goes into being a property owner. First of all, it's your responsibility to find the right tenants and ensure they pay their rent on time. Your property needs to be maintained, regularly. This takes ongoing effort and expense.
Not only this, but it's up to you to market your property when it's vacant. You'll need to screen new tenants, conduct background checks, address repair and maintenance issues, and follow up on lease agreements, all while maintaining an amicable relationship with your tenants.
Just know, there is nothing passive about it.
Myth#3: It's Not Worth Paying Extra On Your Mortgage
If you think that paying the bare minimum on your mortgage is enough, think again. If you want to build real wealth through property ownership, there are certain property management tips worth knowing. This is one of them: making additional payments towards your mortgage can expedite the growth of your financial equity.
By paying a little extra (when you have it), or making lump sum payments towards the principal amount, you can pay off your mortgage faster. The faster you pay down your mortgage, the closer you get to taking full ownership.
This is the best way to build equity and add to your long-term wealth.
Professional Rental Valuation at Your Fingertips
Not sure where to start when it comes to the rental valuation of your property? Our expert property management team understands the market in Kansas City. We know what your ideal tenant is looking for.
If you need professional guidance, take our free rental analysis test here, or reach out to our team for more.
