Note: This article was written by guest contributor Katie Conroy. She can be reached at kc@advicemine.com.
Of the world’s current crop of billionaires, 230 (about 10 percent) made their fortune in real estate. That’s a very impressive statistic, proving that investing in real estate can potentially result in massive yields when done right. This is definitely something to think about as you consider purchasing investment property for the first time, and even more so if setting it up as a rental is what you had in mind. The fact is, it’s not as simple as buying a property and hoping for the best—some real work is needed, too. Let’s break it down for you.
What makes an attractive rental
First of all, a good chunk of your rental’s potential success will already be ordained right from the start—that is to say, when you buy the investment property itself. Location will undoubtedly be a very significant factor. In fact, it’s been found that of the many features that tenants generally look for in a rental, location always comes first. With this in mind, a property that’s close to establishments like schools, restaurants, shopping centers, and even public transportation is almost always a good buy. The safety of the neighborhood is also a huge factor.
Of course, if you really want to make a good investment, this shouldn’t be the be-all and end-all of your purchase. You have to take into account the actual property itself, too. For one thing, while fixer-uppers are generally cheaper in price, you really don’t want to end up with more work than you are willing to put in or can afford. For another, you also want to make sure that other renter must-haves like ample parking, outdoor space, and the like are available or can be easily added in.
Needless to say, it’s a very wise move to know what renters really want, and develop your rental accordingly. For this reason, you will have to be prepared to make improvements, too, running the gamut from updating fixtures and appliances to installing ample eco-friendly measures—to name just a few. Of course, you also don’t want to fall prey to design trends that should be avoided, as some may turn off buyers or may cost more than what you can realistically get back in rent for them.
Preparation is key
Once you’ve made your investment, preparing it as a rental is the logical next step. There are, in fact, so many things you need to think about as you do this, ranging from ensuring safety (e.g., with working locks and security system, well-lit stairwell or elevator) to making sure that it’s actually livable (lighting, plumbing, heating, etc. all in good condition). It’s more than wise, therefore, to have a checklist on hand to ensure that you don’t miss anything—not just the first time, but in between tenants, too.
In this regard, one crucial thing that you need to pay attention to are the appliances. Not only do you want to make sure that they are working, but that there are no problems lurking in the background, especially when transitioning between renters. For instance, if the refrigerator is leaking or not functioning properly, it’s best to call in a refrigerator repair service. Cost-wise, a basic inspection will set you back approximately $100 to $300, but replacing a part might cost upward of $1,000. This, however, is a fair expense, if you want to keep your property rented at top dollar.
Successful management
Finally, do know that you can actually take the myriad tasks of managing a rental off your hands by delegating them to a property manager. Such a service will not only ensure that you’re able to stay on top of your rental’s maintenance needs, but also keep the tenants coming. It’s definitely something worth exploring as a first-timer in the business, as well as when you have other obligations to take care of, too.
Indeed, while joining the three-comma club is still just a pipe dream, your decision to invest in a rental already puts you on the right path. Who knows what the future might hold? For now, just make your investment count, and keep your rental’s occupancy high. That’s already a great deal of success right there!
