Today’s economy is difficult for everyone, especially the middle class. In fact, the middle class has shrunk from about 61% in 1971 to only 50% of society in today’s current economy.
If you’re making do but finding your paycheck dwindling due to inflation and other expenses, you might find becoming a landlord an incredibly attractive prospect: it affords you a bit of cushion and, when well managed, can become a very solid investment that will pay off for the long term. However, there’s a lot of mystery surrounding this field, particularly in how to get involved in managing rental properties. Today, we’ll pull back the curtain and explore exactly how you can start making income off a property.
First, you must find and thoroughly investigate a good potential investment. Learn about its tenant history, its current condition, the neighborhood’s economic prospects, and the current rental market. Think carefully about exactly what you want from your investment, as well as what you’re comfortable with.
If you don’t mind a fixer-upper, you can get a lower price upfront, but you may have to spend more than you expected on repairs. If you don’t like the idea of getting your hands dirty, you’ll need to pay more upfront, but you can expect to rent it out sooner and therefore begin making money back faster.
Perform meticulous research on any property you are considering purchasing; once you’ve gathered all the information, you can use rental property calculators to identify your return on investment.
Utilizing good rental property calculators will help you identify what you can expect from the property so that you don’t overestimate your rental income and potentially outspend what you can theoretically make back.
Take your time finding the right property, and don’t hesitate to compare different offers before settling on a home.
The most important component of having a rental property is, of course, the renters: they will be the ones who will help you pay off the investment and build equity in your home over the long term. You want to find renters who will pay on time, respect your property, and remain for the long term, as any time your property is vacant, you are losing money.
Even in an uncompetitive market, your property will likely be one of many that tenants consider, so you need to make it stand out right away by writing an attractive listing. Be sure to include things like school districts, local attractions, nearby train routes, and any new appliances the unit includes. Have a professional photographer take pictures; it’s always helpful to rent furniture to help show scale, even if you will not be providing this for the tenant.
Most of us know how important staging is when buying a house, but you must bring that same focus to showing off an apartment to potential tenants. Curb appeal matters just as much to renters as it does to homebuyers; many will be reviewing multiple different homes to decide where they would like to live, and a bit of preparation can make your home far more competitive in terms of whether they sign that contract.
Things like nice exterior doors that are secure, well-lit, and clearly numbered will help tenants, especially young women, feel safe, while new appliances and a fresh coat of paint show that you take care of the property and expect the same consideration from tenants. You would be amazed at how little things, like ornate knobs on cabinets or attractive overhead lights, can really make a difference in how a potential tenant perceives your property.
A tenancy is a long-term business arrangement; like any contract, you should expect to negotiate terms with the tenant and be willing to listen to their considerations. Things like extensive references, investigations into their personal finances, and excessive pet fees, while meant to protect your investment, can also make it difficult to find good tenants, especially in competitive markets.
Instead, consider building pet fees into your rent schedule; while it means your prices will be slightly higher, it also means you can attract more tenants, and they will happily pay a bit more each month if it means they can keep their furry friend.
Each tenant can impact your reputation: having a clean, well-maintained property, with a landlord that quickly resolves problems, will help you secure more renters in the future. To that end, you should consider working with a property manager who can manage the day-to-day issues that will arise in any apartment complex, such as a broken water heater or a tripped circuit.
This way, you will gain a reputation for prompt attention to issues, encouraging your tenants to renew their leases and tell others about their good experiences with your properties. You may be able to incorporate this as a business expense on your taxes, which will help ease the cost of doing business with a property manager.
Becoming a landlord is a profitable venture that can provide you with additional income to supplement your primary job. Careful research, meticulous planning, and a willingness to compromise – as well as a recognition of the need for professional assistance – will help you develop a great reputation in the local community, ensuring you great income for years.