7 Rental Property Tips to Consider | The Beginner’s Guide
Are you planning on buying a rental property for passive investing? If yes, here are 7 tips to consider before you decide to purchase one. A rental property provides passive income with less involvement on your part as long as you start on the right track. Read below and find out things you should consider.
How to Make Your Rental Property a Good Investment
1. Set Goals for Rental Property Investing
Setting a goal is very important before making any rental property investing as this will define the trajectory of your passive investment in the future. It is important to take into consideration how much income you are expecting to get. Consider what accomplishments you wish to achieve financially, as well.
2. Summarize All the Finances Involved
An estimate of how much you will be earning and how much you will be spending is critical to determine how much profit you will be gaining. Before purchasing, be updated with the market rates when it comes to vacancy and property rates including the taxes. For the expenses, it will primarily consist of insurance, maintenance, and repairs done over time.
3. Find the Right Location with High Potential for Profitability
Chicago – within top 5 – Best places to invest in rental property https://t.co/UdcO8USSro
— Jo Ceglarek (@JoCeglarek) February 28, 2017
Locations perfect for rental property investing are those near malls, schools, commercial spots, and local transportation. You might also explore locations flocked by tourists or near tourist sites. It is practical to choose a place that isn’t too expensive as you would need to earn back this initial investment. Getting the best deal makes it easier to break even and comes with a higher chance for greater profit.
4. Renovate What Needs to be Fixed and Improved
This cute flip was in a neighborhood that has relatively low resale values for Columbus, so we had to keep that in mind when planning the kitchen remodel. We balanced stock cabinets with granite countertops, cost effective open shelves w/higher end subway tile, and vinyl flooring with a custom range hood. It’s always a fun challenge figuring out how to renovate on a budget without compromising design- this space turned out to be one of our favorites! #chesterfieldcottage #beforeandafter
Although renovation is essential, it is best to consider keeping your renovation expenses to a minimum. This lets you save for maintenance repairs you may need over time. A renovated place gives you the advantage of pricing it with a higher rent rate. Look for the spot inside the house that you can convert into something profitable. Then, you can attract tenants even if you give it a higher price.
5. Know the Tenants Who Will Rent the Place
Identify how many number of occupants fit the space, and screen your tenants accordingly. The upgrade and renovation of the place will also determine whether it is set up to be used by a family or a single person. Doing this helps you estimate how much costs it will require for maintenance due to wear and tear.
6. Create a Timeline and Rules
Consider how long your rental terms last. Will it be a long-term or a short-term lease? If it is a short-term lease, it’s best to set aside funds for the upkeep and cleaning every time a guest leaves and a new one arrives. Rental guidelines are also important as these minimize hassles and potential problems on your part when it comes to dealing with your tenants. This suffices for a clear agreement between you and the tenant, too.
7. Consider Your Options
Last but not the least, consider the level of management required. Will it be possible to manage the property with just you and another person or will it require you to hire a property management company? You should also consider the competitors around the area where you are planning to buy your rental property.
Passively investing in a rental property can be a risk just like any business venture. If equipped with the right knowledge, the returns can be greater than what you originally invested. The opportunities on rental property are promising and taking that risk might be worth it after all.
Do you have other rental property investing tips in mind? Feel free to share them in the comments section below.