Rental properties can make for excellent investments. Not only do they increase in value over time, but they also produce steady cash flow. However, there’s a big difference between a low-maintenance, turnkey property and a property that needs its hand held every step of the way. Learning how to differentiate between the two before investing will increase your chances of being profitable and successful.
As an investor, you make your money when you buy. If you meticulously research your options and know exactly what you’re looking for, you’re far less prone to making a costly mistake that will haunt you for years to come. In particular, there are some features and factors that you don’t want to mess with. It’s recommended that you avoid any properties with the following:
Curb appeal is important. We’ve spent a lot of time discussing curb appeal on this blog and how it can quickly solidify a positive first impression and help landlords attract prospective tenants to their properties. But there’s a difference between having nice landscaping and too much landscaping.
Landscaping is always a touchy subject for landlords. Landlords typically believe tenants should play a part in taking care of the property, while tenants have no interest in mowing the lawn or pruning bushes. So when there’s heavy landscaping – meaning lots of bushes, flowerbeds, landscaped islands, and plants that require regular attention – frustrations can boil over. Either you have to pay for someone to do the landscaping, or it ends up looking messy and over-grown. (At which point curb appeal is non-existent.)
When looking for investment properties, try to find units that take a minimalistic approach to landscaping – just a few shrubs here and there. This will be enough to make the property look somewhat attractive without creating significant complications.
Swimming pools are nice, but they aren’t for rental properties. It takes nearly 810 gallons of water to fill a simple 6-foot-by-6-foot swimming pool to a depth of three feet. If you have a full-size pool, you’re looking at thousands of gallons of water – or the same amount of water a typical household uses in a month.
On top of the water requirements, swimming pools require a ton of maintenance. They need to be cleaned. The water has to be treated. Leaves have to be fished out. The list goes on and on. But the biggest risk is a leak. As a poorly maintained pool ages, it becomes susceptible to cracking and leaking, which can cost thousands of dollars to repair.
The moral of the story is this: Don’t buy a rental property with a swimming pool. It’s just not worth the hassle. If you think it’s necessary, spend a couple hundred dollars and give your tenants access to a local community pool.
One of your goals should be to buy a property that’s free of systems that need frequent repairs. Unfortunately, an HVAC system – which is prone to issues – is necessary for almost every rental property. So while you can’t necessarily buy a rental property without one, you can ensure the furnace and AC units are in good working condition.
If possible, look for properties that have HVAC equipment still under warranty. Or factor the price of a new system into your purchase and replace them before tenants move in. Not only will this save you money over many years, but it’ll also limit the number of headaches you have to deal with.
Because carpeting is cheap, many rental properties on the lower end of the market will have it throughout the home. But this is less than ideal.
“Carpeting muffles noise, which is a great advantage in a multi-family unit. It also adds insulation and makes a room cozier,” landlord Chris Deziel admits. “But these drawbacks outweigh the benefits.”
For example, carpeting – particularly heavy-pile carpeting – can store mold and bacteria. Spills and pet accidents are also more visible, which means it needs to be replaced rather frequently. Finally, carpet fades quickly in rooms with lots of sun. This can create uneven patterns around furniture.
In lieu of carpet, look for rentals that have hardwood, vinyl, laminate, or ceramic tile. Each of these items is more durable, waterproof, and mold resistant.
If you’re in the market of buying high-end rentals that are intended for corporate clients and wealthy tenants, an HOA type community is perfectly fine. These individuals are accustomed to living in communities with rules and regulations and are likely to care for the property in a way that satisfies the bylaws. However, it’s a bad idea otherwise.
If you’re at the middle or lower end of the rental spectrum, an HOA will end up being nothing more than a source of frustration. Neighbors won’t be happy about having a lot of turnover and tenants are less likely to abide by the rules (which result in you fielding complaints from the HOA).
Experienced landlords with lots of properties have a list of things they do to prepare a new investment unit for rent. Near the top of this list is garbage disposal removal.
While a garbage disposal might be convenient, it’s terrible for a home’s plumbing. No matter how well a disposal chops up food, it’s still allowing non-liquid substances to go down your drains. Over time, this leads to clogs and/or damage to the pipes themselves. You don’t need the hassle!
A screened porch is a nice selling point. Everyone loves outdoor living space and it can serve as a competitive advantage when you’re up against other properties in the same neighborhood. But when it comes to rentals with tenants, it’s better to do without.
Screens often take a beating – from kids, pets, and otherwise – and will need to be replaced fairly regularly. Again, it’s not worth the hassle.
Real estate investing yields numerous benefits. But even the most optimistic investors have to admit that there are distinct challenges that come with the territory. At Green Residential, it’s our mission to help Houston-area landlords manage their rental properties with less time commitment, greater efficiency, and maximum profitability.
For more information on our comprehensive property management services, please contact us today!
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