How to figure out how many rental properties you can comfortably manage

Owning rental properties is a great way to increase your wealth. For some, owning multiple properties is ideal, while others find that owning just one is plenty. If you aren’t sure how many properties you can comfortably handle, consider these three points to help you figure it out.

1. Your Personal Finance Goals

Many investors consider real estate investing to be a business, but ultimately, you’re using your own finances to fund the venture. From purchasing to maintenance, the money comes from your own bank account, so it’s important to consider the following when deciding how many properties to own.

Debt:

The first thing to consider is how comfortable you are with debt. Real estate investors fall into one of two categories: those who are comfortable owing money and those who are not. Which one are you?

Financial Goals:

Do you hope to build a large retirement fund, or do you want to create a passive income you can enjoy right now? The answer to this question will help determine whether you should work toward building a large portfolio or if you should concentrate on owning just a couple properties that you pay off quickly and enjoy a passive income from each month.

2. Your Available Time

Owning rental properties can be time-consuming. From finding good tenants to collecting rent and maintaining the property, there’s a lot to do. How much time do you have to devote to the venture?

Managing the properties yourself:

Do you have a full-time job? Will you have help from a partner or spouse when it comes to taking care of management duties? When you choose to manage a rental property yourself, you are responsible for every aspect of the venture.

Hiring a property manager:

If you juggle a full schedule, you might consider hiring a property manager to handle the operating and maintenance tasks of your rental properties. This means allocating a portion of your profits to pay the manager, so it’s important that you monitor your finances to maintain a positive cash flow.

3. Your Investment Strategy

You got into real estate investing to make money, right? Your investment strategy will determine how quickly and how successfully you reach your financial goals. How can you earn the most money with the least amount of hassle?

The most profit:

Will you own several cheaper properties or just a few more expensive ones with higher rent potential? Do your homework and figure out which option reaps the most reward.

Know the laws:

Learn the laws in your state and understand which ones could pose a problem to your financial situation. For example, in Illinois, it’s mandatory you place all security deposits in an escrow account if you own five or more rental properties. Furthermore, you must return said security deposits within 30 days or provide receipts for repairs made within 45 days of a tenant vacating the premises.

Owning multiple rental properties might be ideal for you, or because your schedule is so busy, owning just one or two might be better. Either way, only you know your financial goals and how much you can comfortably handle. Consider the points listed above to determine how many rental properties you should own.