Real estate has long been known to be an excellent investment opportunity. Consider the fact that hoe values grow year-over-year, without fail. The real estate is projected to be worth $3717.03 Billion by 2025 with a compound annual growth rate (CAGR) of 3.2%.
As with every other industry, COVID-19 has thrown the real estate market into turmoil. There’s a housing shortage at every level of the real estate sector. This is causing many potential homeowners to rent instead of purchasing a home. This creates a major opportunity for investors looking to get into real estate.
Managing a rental property is an excellent investment opportunity as it provides a steady income flow. It does require some know-how to do it properly, however.
At present, there are 44 million homes occupied by renters in the United States. 75 million homes are occupied by homeowners by way of comparison. The number is going to continue to escalate due to the shortage of available homes.
If you’re thinking of buying a rental property, here are some tips on managing a rental property to make your transition into rental property management as smooth as possible.
1. Finding a Rental Property for Investment
The first step in managing a rental property profitably is finding the property itself. There are some characteristics you can look for when buying a rental property to make sure it’s actually going to be profitable. They will also make your life easier when you start managing the rental property in earnest.
You hear it all the time when it comes to investing in real estate – “location is everything.” That’s not entirely accurate as there’s no one correct way to be a landlord. Where your rental property is located will greatly influence your rental property management experience, however.
There are two main things you should keep in mind when considering a rental property’s location. The first is what kind of people tend to live in the area you’re considering. The second is what the current real estate situation is like.
Say that you see an available property in a trendy part of a city. It’s a condo that’s within walking distance of a plethora of popular restaurants, venues, and other cultural attractions.
Now imagine that vacancies don’t happen all that often in this particular neighborhood. These two signs indicate that this is a solid investment opportunity. There’s also a good chance you can probably rent that property out quickly.
If you have a decent amount of available capital or have access to loans for rental properties, finding an attractive property in a popular neighborhood like this would be a good fit.
If you’re dealing with less capital at the outset, you might do better finding a property in less-popular neighborhoods that have other attractive features.
The local culture of a neighborhood is an important aspect of a property’s location. This also will greatly impact the tenants you attract and the price you’re able to get for your rental property.
The local culture encapsulates many different things. The economy is one of the most common to consider. If there’s a thriving job market near your rental property, there’s a good chance it’s going to have a high demand and earn you a good price.
Schools are another important thing to keep in mind when you’re considering buying a rental property. If there are good schools around a house or apartment, it’s going to be a draw for families with young children. This will also help you get a better price when it comes time to rent.
The condition of a property plays a major role in a rental property’s profitability. Once you get closer to making an investment you should go over the property with a trained home inspector. There are things an untrained eye might miss that could result in very expensive mistakes.
If you’re looking at houses or standalone units to rent, pay special attention to the roof and basement if there is one. Leaky roofs can be surprisingly expensive to repair and that’s not an expense that should be taken on if it can be avoided. A basement might not be sealed properly, as well, which could lead to moisture leaking in.
This is not only unpleasant, but it can also be a health hazard. A leaky basement could lead to black mold and other health risks.
Getting rid of black mold or sealing a foundation can be surprisingly expensive to fix. Again, it’s best to be avoided if at all possible.
Working With Tenants
Now that you’ve found a property you want to invest in, it’s time to start renting. Managing a rental property is unique in that it requires a solid business sense but it also requires soft skills like communication, empathy, and more than a little patience. Emotions can run high at times, as you’re dealing with people in their homes.
Think of managing a rental property like any other skillset you can learn and master. When you first begin managing rental properties, it’s a good idea to learn about the most common tenant complaints. This will help you be proactive and avoid these problems before they even occur.
Inspect Your Property
Regular property inspections will also help you neutralize many common problems before they even begin. You might notice a leaky pipe during a walkthrough or evidence of a pest infestation. This way, you’re able to address an issue before it inconveniences your tenants.
Communication is key for maintaining any kind of healthy relationship. It’s especially important in a landlord/tenant situation as it will help keep your tenants at ease as they’ll know what to expect.
If your tenant has a request, being proactive in communication will help keep them informed on the status of their issue. Dealing with a leaky pipe for 48 hours feels a lot different than living with it indefinitely. It will also make your life a lot better, as they’re far less likely to be messaging you incessantly about the status of their problem.
If you do have to make a repair, it’s a good idea to send a follow-up message after the fact. This gives you an opportunity to find out if everything has been resolved. It gives your tenants a chance to let you know if there were any issues during the repair process, which can be especially important if a third party handled the request.
Communicating with your tenants is an important part of maintaining a healthy relationship. It’s also important in establishing documentation should something go wrong and legal action becomes necessary. Hopefully, that never happens but when you’re a landlord you need to be ready for anything.
The most important aspect of managing a rental property is getting paid. It is a business, after all. It’s also one of the more challenging aspects of being a landlord.
Preparing for those challenges ahead of time can help keep those problems to a minimum.
One way to reduce late or absent rent payments is to make the payment process as easy and as painless as possible for your tenants. Setting up an online payment system is one way to go about this as they can pay anywhere, at any time. They don’t even have to leave the house to make sure you have your rent check.
Late charges and rental agreements are both useful ways to help tabs on the rent collection process. They also make things easier if things happen to go off the rails and you need to start the eviction process.
As a rental property manager, it’s in your best interest to keep a renter for as long as possible. If your property ends up going on the market there’s the possibility it could sit vacant for an indeterminate amount of time. Not only are you not making money on your property at that point, but you’re also actually losing money.
Things like property taxes and utility bills don’t stop simply because no one’s occupying a space.
Therefore, it’s in your best interest to hold onto tenants as long as you can especially if they’re reliable and trustworthy. A good tenant is a valuable asset, indeed.
Properly screening tenants during the rental process is highly recommended, as this will help you find good tenants and avoid many potential problems down the line.
Strategically upgrading a property is another way to help ensure happy, satisfied tenants that want to live in your rental property long-term. New kitchen appliances or cosmetic upgrades when a property’s on the market are a fantastic idea if you can afford it. These will help you earn a higher price for your rental, as well.
When you have a good tenant, it’s in your best interest to hold onto them as long as possible. When you begin managing a rental property for the first time, it’s important you understand the legal responsibilities of a landlord as fully as possible. This will help you delineate between what’s your problem and what isn’t.
Understanding your responsibilities, addressing problems when they arise, and communicating well with your tenants go a long way towards maintaining a healthy relationship with your renters. They’re likely to reward you by staying for a long, long time.
Working With a Property Manager
One final thing you might want to think about when managing a rental property is whether or not you want to actually do the work yourself. Working with a property manager helps to neutralize a lot of the problems you could potentially run into when buying a rental property. If any of those problems arise, you might not even have to deal with them yourself.
Distant Rental Property
One circumstance when hiring a property manager that makes a lot of sense is if your rental property is out of state. In that circumstance, it’s a very good idea to have someone managing your rental property that’s closer in case something should happen.
Professional property managers will also be well-trained in the legalities and practicalities of running a rental property. They’ll already know what’s a landlord’s responsibility and what isn’t. This will greatly reduce the amount of homework you have to do when you’re first getting started.
Professional property managers likely have relationships with local tradespeople and services, as well. They’ll have numbers for reliable plumbers, electricians, and carpenters on their speed dial. This checks one more thing off of your list and greatly reduces the stress and headache of managing a rental property.
Things To Consider When Working With a Property Manager
If you do end up working with a property manager, it’s a good idea to decide ahead of time how involved they’ll be. Do you want the property manager to be a sort of maintenance person? Or would you want them to handle all of the duties of running a property, including choosing tenants?
If you do end up choosing a property manager that will handle all of the details of running a property it’s important that you’re both on the same page in regards to choosing tenants and landlord’s responsibilities. A property manager will likely be maintaining more than one property. There’s a chance they won’t be as invested in your particular property as they’re just the manager, not the owner.
Many of our tips on maintaining good relations with your tenants can apply to property manages as well. Having good, clear, direct communication that state-specific expectations will eliminate many potential problems before they even occur.
Taking the time to get prepared ahead of time will make your journey into managing a rental property as pleasant as possible. You’ll be less stressed, your tenants will be happier, and you’ll be able to focus on reaping the rewards of your investment.
Thinking of Managing a Rental Property?
Managing a rental property can be highly satisfying as well as profitable. It’s a way to give back to your community while acting as a stable investment for you and your loved ones at the same time.
If you’re looking for a loan to begin your journey into rental property management, we’ve made that process simple, easy, and painless. If you’re looking for the most competitive rates on rental property loans, click here to get started today!