Tutorial on handling tenant security deposits in Oklahoma.
The most common mistake people make when buying investment property is underestimating the expenses. If you simply look at the scheduled monthly rent and subtract your mortgage payment, you are missing a significant portion of the expenses. In addition to principal, interest, taxes and insurance, you must also factor in vacancy (which is not technically an expense, but it reduces your collected rents), repairs, capital expenditures (roofs, HVAC equipment, etc.), management fees (even if you self-manage, you are spending your time and gas money) and evictions. Even if your tenants take good care of your property, there will be cleaning, re-painting and minor repairs when the property turns over. I like to aim for my monthly scheduled rent to be double the amount of my mortgage payment, including the tax and insurance. So if my mortgage payment is $400, I want the rent to be at least $800. This rule assures that I will have positive cash flow over the long term.
This blog will discuss my experiences investing in real estate in the Oklahoma City area.
I bought my first investment property in 2005, and a second in 2006, both in Edmond Oklahoma. I liked the idea of having a tenant pay off my mortgage for me. I had no idea how to manage a rental property or what the expenses would be. Neither did my realtor, who was supposed to be managing the properties for me. After 2 years of late payments, missed payments and destructive tenants, I took over management of my own properties. I realized I needed to remodel my houses to make them attractive to the kind of tenants who would pay on time and take good care of the property. I also realized I needed to buy cheaper houses. I first rehabbed and stabilized my rentals in Edmond. Then, from 2010 through 2013 I bought 5 houses in the Midwest City/Del City area, ranging in price from $30,000 to $50,000. I performed (or at least managed) extensive rehabs on each of these properties, taking them from abandoned foreclosures to some of the most desirable rental properties on the market. I also learned how to screen tenants and to properly market and manage rental properties. Since 2009, my properties have averaged 2% vacancy.
My goal with this blog is to share my knowledge and experiences with anyone who is curious about investing in real estate in the Oklahoma City area. I will also detail some of my current investing activities.