While first-time landlords may assume that any rental property is guaranteed to generate healthy returns, this is far from the case. In fact, depending on location, general condition and a variety of other factors, a rental property stands to lose you a lot more than it ever stood to make you. As such, anyone looking to invest in their first rental would do well to enhance their knowledge of property ownership and management. If a profitable rental property is what you’re after, the following pointers are likely to prove useful.
Invest in Properties in Popular Locales
It should come as no surprise that a rental property located in an area with abundant demand for housing is likely to prove more profitable than a property in an unpopular location with waning demand. With this in mind, make a point of engaging in thorough location research before proceeding to make a serious offer on your first rental property. The more you know about an area, the better-equipped you’ll be to make an informed offer and a smart purchasing decision.
In your efforts to determine how profitable a locale is likely to prove, take some time to research property values, rent prices, population size, growth projections and median income. This information will provide you with a clear picture of how in-demand an area is and how much income you stand to make by purchasing a local rental.
Stay on Top of Maintenance
There’s little wonder as to why poorly maintained rental properties tend to drop in value. In addition to being unappealing, unsanitary and potentially unsafe, rentals that don’t receive proper maintenance are synonymous with low tenant retention rates and landlord-targeted lawsuits. On the flipside, staying on top of property maintenance can provide highly conducive to favorable tenant retention rates and help increase the value of your rental.
The level of maintenance a rental property requires largely depends on its age, general condition and size. For example, if you’re dealing with a small single-family property, you may be able to handle the bulk of the maintenance tasks without any outside help. Conversely, if you’ve purchased a large multi-unit property, there may be no way around recruiting full-time maintenance personnel. An apartment building or condo complex, for instance, may contain dozens – if not hundreds – of units, and there’s no way one person can properly address every maintenance issue that arises on their own.
In addition to hiring knowledgeable, personable maintenance professionals, it’s imperative that you respond to maintenance requests in a timely manner. Depending on the severity of the issue, letting it go unaddressed stands to compromise tenant safety and cause considerable property damage. Furthermore, failure to promptly act on maintenance requests is liable to result in the low tenant retention, lawsuits, scathing online feedback and the withholding of rent. So, if you’re curious about how to increase rental property value, make sure to regard maintenance as a top priority.
Be Mindful of High-Risk Rental Applicants
No landlord likes leaving units empty. After all, if a unit is without an occupant, it isn’t generating any income. However, regardless of how desperate you are to fill a unit, you should always be mindful of high-risk rental applicants. If you take on a tenant who is unable and/or unwilling to stay current with rental payments, you’re liable to have a very hard time getting rid of them.
In the interest of avoiding such tenants, make a point of subjecting every rental applicant to a thorough screening process. Among other things, this entails confirming that an applicant has sufficient income to afford rent, a decent credit score and favorable references – after receiving their permission, of course. You should also look into each applicant’s criminal background – again, with their permission – to confirm that they haven’t been convicted of any crimes that could pose a danger to other renters and/or the property itself. If you lack the bandwidth to carry out the screening process on your own, consider reaching out to a reliable screening service.
Simply purchasing a rental property and expecting profits to come rolling in is a move that’s likely to result in disappointment. While it’s true that rental income is generally regarded as passive income, this doesn’t mean that landlords can take a hands-off approach and shirk their responsibilities. As such, anyone looking to generate considerable returns with their first rental property will need to put in a fair amount of effort and carefully consider the advice outlined above.
