Investing in the rental business can be a very smart move – but only if you know what you’re doing and have the resources to do it. The majority of people would love to own real estate properties and rent them out for a profit, but there are a lot of nuances that people don’t quite realize.
It’s a lot of work to get a loan, buy a home, fix it up, rent it out, write the rules of conduct, and also follow all the laws that the state and federal court place on landlords. In addition, you now have two mortgages that you’re responsible for.
How do you know that your tenants are going to pay on time? How do you know that they’re going to pay at all? How strict of a landlord are you going to be? Are you going to allow pets? Smoking? Shoes in the house? Paint on the walls?
If the market is good and your rental property is worth a chunk of change, you can make a good return on your investment every month, but it can be a delicate balance, and you have to decide if the payoff is going to be worth the risk.
A large part of making sure you get a return on your investment lies in the renovation process. It’ll be tempting to offer all the amenities possible so that you can ask a higher price for your property, but before you go installing stainless steel appliances and granite counter tops, you need to evaluate a few things.
What are We Renting?
Before you even begin the process, you need to decide what kind of property you want to rent out.
You probably automatically assume the standard single family home would be the jackpot of rentals, but don’t limit yourself to this box.
Other rental property options include duplexes or townhouses, small apartment buildings, bigger apartment buildings, condos, luxury apartments, low income apartments, office space, studio space, shelter space, transitional housing, and rehab living facilities. Each space will offer and require something different, so think hard on what it is your mission is. This will determine how nice you make your rental and how much money you invest up front.
What’s Our Realistic Budget?
Once again, it’s tempting to want to put all sorts of money into the project, but you have to look at what you can afford. There are a lot of hidden costs to being a landlord and you don’t want to stretch yourself too thin in the beginning stages. Consider every possibility.
What if you get the property ready and can’t find a tenant right away? This means the mortgage is all on until the property is filled. Can you afford that cost?
It’s going to take you a bit of time and probably several renters to pay off what you put into the home. If you think about it, most people take 30 years to pay off one home mortgage and you are going to have two! You can’t neglect this question when renovating your property. You may or may not be able to afford top of the line features in your property, but timeframe is another thing you need to consider before installing that hardwood flooring.
What’s the Neighborhood Like?
A huge factor in what’s going to be expected in your rental property depends on where you’re located. What’s the quality of the neighborhood you’re looking to build or renovate in? Is this area of town going to hold you to specific standards that’ll be hard to meet? Are there good neighbors around? Are you downtown or uptown? Ritzy or low-income? High-crime or family-friendly? All of these aspects are going to guide you in your decisions about how nice is too nice for your rental.
How Much Can We Charge?
This seems to be a challenging question to answer. Everyone wants the maximum price they can get for their property, but there are so many factors that play into this. As stated before, what’s the neighborhood? What are properties in the area similar to yours going for? What city are you in?
When renovating your property, be sure to look inside the properties around you. This will give you an idea on what the other properties are going for based on the features that they have. Even if you’re in an area that doesn’t have a lot of nice homes, you can get your price point from them, upgrade a few items like the kitchen or the flooring, and charge more from there.
Everything is relative. Just because you’ve built a Beverly Hills mansion in the Bronx doesn’t mean people are going to buy it, especially at the price you want for it. It’s all about location, location, location.
Can We Get a Little Help?
While real estate is a well-known avenue for getting a return on your investment, this doesn’t mean that it’s an easy task. There is a lot of homework to be done before you even buy your property. Once you’ve bought your property, the work load continues to increase. In order to get to a point where your properties practically run themselves and you just get to live off of the return, you have to put in a lot of work; and realistically, properties never run themselves – the work load just gets redistributed.
Luckily in this aspect, Green Residential is available to help. You don’t have to manage your property blind and alone. If you’re a landlord looking for help managing your influx of responsibilities, we have experienced residential property operators who know how to give you exactly what you need. We specialize in property management, leasing, tenant screening, maintenance, inspection, and eviction.
Have more questions? We have answers. Feel free to contact us today!