There are three factors that you should be aware of when you look to buy rental houses here in the suburbs.

Knowing these, and acting on them, will substantially reduce your risk as a rental house owner.

The three factors are:

1. Never own a property in your name

While I’m not an attorney, I recommend holding your rental properties in a Limited Liability Company, or LLC.

If you and your property manager operate your LLC correctly, it will give you liability protection against lawsuits that may attempt to go after other properties you own or money you have. Talk to an attorney or CPA if you have questions. I can refer you to the people I use.

Choosing the right property manager is critical.

Think about it. You’re investing from a distance, and you’re buying rental houses here in the suburbs to generate consistent and predictable cash flow. Your your property manager, therefore, is the person who will have the greatest impact on it.

The best solution is to manage the properties yourself, because no matter what any property manager tells you, they don’t and won’t care as much about your property as you do.

Again, take it from a rental property owner!

So it’s important to cull through the hundreds of property managers around and find the one that’s the best for your property.

It sounds like looking for a needle in a haystack. Fortunately it’s not that difficult.

The reason is because you should look for a property manager that has direct, specific experience managing properties in the neighborhoods you’re buying in, because every neighborhood is different.

I alluded to this earlier and I want to reiterate it so there’s no misunderstanding.

DO NOT RENT TO SECTION 8 TENANTS!

I’m sorry to have to say this, because when I got started I was a big fan of the program, and I routinely had around 10% of my tenants in the program.

Over the last 18 months or so however, the program has changed. And not for the better.

The problem is that tenants are no longer being held accountable for their actions.

Over the last 18 months I’ve had Section 8 tenants leave without paying huge water bills, leave after they’ve done damage to the house, leave after having pets, which I don’t allow because they destroy the inside, and leave owing back rent.

All of which are against the rules of the program. And each of these violations, according to the Section 8 rules, is cause for a tenant to be removed permanently and immediately from the Section 8 program.

Believe me when I tell you that all houses are not alike. And as crazy at it sounds, renters are picky, and are getting more so every year. So choosing the right types of houses to buy matters a lot to your long-term success and profitability.

Thankfully though, picking the right types of houses is not rocket science either.

Over the last seven years, through trial and error, and through exchanging notes with other rental property owners in the suburbs, I’ve developed the ideal set of criteria for rental houses.

This criteria does two things – it takes into consideration the wants and needs of a picky rental market, and it takes into consideration the wants and needs of you and I as property owners.

Why?

Because you need to think about marketability to renters when you buy. You can get a great deal on a house, but if it’s some weird or non-standard configuration you’re not going to have any success renting it.

The key to developing a consistent rental cash flow in Metro Detroit is getting great tenants. The key to getting great tenants is to buy in the best areas. And the key to identifying the best areas is to focus on the best school districts.

It’s not rocket science!

In my experience families with kids make the best renters. And renters with kids want the best school district they can afford, just like every other parent on the planet.

And once they pick the district, and the kids are enrolled in school, the family tends to stay in the rental house a good long time. They pay consistently and on time. And they take better care of the house.

So school district is the #1 criteria for picking an area to buy rental houses.

The great thing about this criteria is that you don’t have to know a lot about the area. If you have the right house criteria and you’re in the right school district, you’re set.