5 Pieces of Tips and Advice for Investing in Rental Property
Written By: Andrea Erickson
Rental properties are a hot topic again since the real estate market is a madhouse currently, and many people are trying to figure out how to cash in on this. Although you can’t go back in time and buy properties when they were far cheaper: you can get the most income possible out of the currently available properties.
Here is some important information you should keep in mind when looking at which properties to invest in.
Consider if There’s Extra Land to Develop
When buying land, look beyond the current buildings that are sitting on it. Although things are far easier if you can rent out already finished units: there’s always room for more. While still maintaining common spaces, room for parking, and the apartments themselves, consider if there’s enough room on the property or neighboring property to expand the apartments further. The more units, the higher return, and the faster the property gets paid off so that it’s nothing but income.
Use Software to Manage Everything
Although it might seem obvious, many first-time renovators don’t realize how much goes into owning a rental complex: the more units, the more problems. Good software will let you track when an apartment was last renovated, how many issues a renter has caused, and who’s paid on time or not. Seek out landlord maintenance software that will help you track this information.
A worthwhile software should also notify you when a renter’s lease is closing soon, take care of maintenance, and be easy to use. If a property management app doesn’t have what you need, it’s never too late to switch to a new one.
Ensure the Property is Appealing
Aesthetics matter to everyone. Even though sometimes people will overlook an unattractive property if it means the costs are low enough: you don’t want your property to be like this. The lower the rent, the lower the profit. When purchasing a property, ensure that you pick one that people will want to move into.
The top things that build appeal are:
- Natural areas with trees and grass.
- Beautiful, clean, and fresh-looking exteriors.
- Amenities like pools and tennis courts are visibly well maintained.
- Gorgeous skylines if within a city.
- Attention to detail in everything from a well-maintained sidewalk to the apartment number signs.
The attractiveness can always be built upon by creating areas with natural beauty, like portions of land with trees and grass, or updating the interiors with the best flooring for rental properties.
Look Into the Current Rental History
If the property you’re looking at has already operated as an apartment complex or a rental property in general, what’s its history look like? How long have other land buyers overlooked this property? Ask the current owners how much they get on average for rent and if the current renters are responsible and pay on time.
Changing management doesn’t mean that the renters will necessarily have to leave, depending on the terms of their lease, so it’s a good idea to get to know the type of people who live in the area. If the complex seems to have a lot of eviction notices, or it’s in a place where the cost of rent wouldn’t be sustainable for the average wages of the area, this might not be a great property.
Don't Assume Any Project Could Be Considered Small
Looking at rental units to purchase, it can be tempting to view them the same way we view homes when we are buying them. A fresh coat of paint here, composite slate on the roof there, it might seem simple: but apartment complexes will quickly become expensive. Unfortunately, there’s no way to avoid these costs if they’re necessary, so when you’re shopping around, consider which projects you’d be willing to do for every single unit that you’ll be renting out.
It might not be a big deal to remodel the bathroom of a home, but remodeling the bathrooms of an apartment complex will eat up a lot of time and resources. Avoid this; take the time to make sure the property you purchase is the best fit possible. If you do need to do extensive updates, budget to ensure there’s room for that in your time and financial budget. Don’t leap into a project without knowing the full story.
Rental Properties Are Passive Income Gold
Whether you’re purchasing several apartment complexes or a single-family property, rental properties have the potential to divert thousands upon thousands of dollars to your bank account.
To build upon these properties, it’s good to update each space within the room by room when people move out. This will allow for a more gradual transition to a completely updated property while still ensuring that most units are in use or are more quickly available.