Rental properties continue to be profitable investments in today’s market. The demand among renters remains strong, and has been rising since 2007. If you’re considering an investment in a rental property, now is a good time to do it. In addition to the strong demand, home prices are seen to increase by 3 to 6% in 2018. Careful property selection can help you realize a great return on your investment in the long term.
One thing to keep in mind is that building wealth through rental properties takes time. You can realize optimal profits only after the property is fully paid for. But the good news is that while you need to spend on mortgage payments and on upkeep and maintenance, the property will pay for itself through your rental income.
To succeed in being a landlord, you need to remember that a rental property is a business, and should be treated like one. Here are some pointers to consider:
Choose the location
The success of many businesses comes mostly from a good location, and this is especially true for rental properties. You might find a home that’s enticingly low-priced, but this could be because it’s located in a neighborhood that many renters may not find desirable, perhaps because it’s far from schools or commercial areas. Research on the neighborhood before buying a property, and only buy in one where people want to live.
Work on your budget
When investing in a rental property, you have to consider not only the mortgage payments but also your maintenance expenses. You also need to determine the right rental rate. Rents vary according to location, and you have to figure out what the going rate is on where you plan to buy.
You then need to do the math and see if your expected rental income will cover your expenses. You can use certain industry figures, such as capitalization rate, to gauge the profitability of a property and guide you in property shopping. You would also be well advised to get the help of a professional to provide an accurate assessment.
Be prepared for the job
Being a landlord includes learning how to manage your property. If you only have one rental property, you can save money by managing it yourself. This could mean doing jobs you may not have experience with, such as home repairs and reminding tenants to pay the rent.
If you’re renting out two or more properties, it might be a good idea to hire a professional property manager. If you have a day job and don’t have the time to be a hands-on manager, hiring a professional might be the best course to take even if you only have a single rental property.
Make sure your tenants are happy
A vacancy can cost you a lot of money as you’re spending on mortgage and upkeep without getting an income. To avoid this, cultivate a good relationship with your tenants. Keep your property in good shape, tend to your tenants’ concerns, and be respectful. The ideal tenants are those who stay for a long time and show respect for your property.
To learn more about investment opportunities in rental properties, schedule a consultation with me today.