Real estate investments are a tricky business. While they might eventually reap profits, it often takes years for their value to appreciate and for the owner to receive a significant return-on-investment. In the meantime, some owners have created a cash flow by renting out space in their properties to qualified tenants and collecting rent. Whether its commercial or residential real estate, savvy landlords can turn insane profits if they can successful manage their rental property and address tenants’ needs.
The Landlord’s Guide to Operating a Lucrative Rental Property
Setting Rent
Before one even begins the tenant search, one must first decide on rent for the property’s individual units. Just because someone has an ideal figure in their mind, that doesn’t mean it’s the right one to charge.
The Factors
It may be entirely unrealistic depending on the unique features of each property and neighborhood. To set a reasonable asking price, it’s best to consult local real estate agents and brokers that are familiar with the process and area.
Otherwise, interested property owners can also conduct their own market research by looking up the rents for similar units with comparable amenities and features. If it’s possible, the collected rent's sum should compensate the cost of mortgage payments and property taxes.
Setting Aside Funds
Remember, you’re not just going to keep all of the money you earn from rent. A decent portion of it should be invested back into the property in the form of upgrades. Remember, this is an investment property after all. You should always be making improvements that will raise its property value.
Maintenance
Don’t forget that you’ll also be responsible for the vast majority of maintenance in your rental property’s units. Most of the time, repairs can be unexpected and cause a fortune. Make sure you always have enough cash on hand to fix any issue that arises.
If you ignore issues and decide to pocket your profits instead of reinvesting them, your relationship with tenants will fracture. No one will want to renew their leases and you will never receive any new prospects. Furthermore, the state of disrepair in your property will take tank its value.
Finding the Right Tenants
Owning a rental property is that much easier when you have respectful, responsible tenants occupying your units. Although quality renters aren’t always easy to find, they will give you an unparalleled peace of mind.
Tenant Screening
Landlords who are considering potential tenants have several options to explore when trying to determine if they’re the right fit. Start with a face-to-face interview to see if you can gauge the kind of tenant that they’ll be depending on their personality or disposition.
Otherwise, you can conduct a credit check, criminal background check, and verify their income and rental history. The insight that you’ll gain from these provisions should be enough to truly decide if they would be a worthwhile candidate.
If you are thinking about turning your real estate investment into a rental property, these few tips should be enough to get you off the ground on the right foot.
