Renting out properties might seem very straightforward but you need to cover the basics well especially if you are just starting out in the business or you have plans expanding your property listing. Getting it right in the early stages can spare you from unprofitable situations later on. Here are some important reminders that I have listed through the years. These helped me a lot in sustaining my property rental business – these might help you too.
Invest small then grow by learning
Many people are waiting for huge deals on their first property. While there is really nothing wrong with this, I find it more practical to start with smaller deals. Why? So that I can learn my way to bigger deals. Bigger stakes mean higher exposure to risks and I do not want to pay too much for learning the ropes. Start small, learn, and then take on bigger listings.
Know the areas where you will buy properties
Take time to research the area where you want to invest. Inquire about the going prices of properties, know more about the possible developments nearby, understand the buying and selling trend around that location, and etc. The more you know about the area the better you can assess the value of your investments. Remember purchasing a property and turning a rental profit out of that is a long term exercise. Be sure to buy the right ones from the very start.
Ensure your rental profits
Many people simply accept the assumption that all property investments will give you positive cash flow. This is simply not the case. You have to factor in the loan you will be securing from the bank to purchase the property and how your rental earnings can cover the loan plus interests so that you turn a profit.
How to make sure a property is good for business? You start by computing for the property yield. Armed with figures in your research, have a rental projection for the property for one year and then divide that by the principal amount (purchase price). Look at the numbers and how they all add up. If you see a good return, the property is worth your money.
Get into the nitty-gritty stuff
This is especially important when you are starting out. If you can do the minor renovations for your purchased property, then do it. You have to be open to the idea that you will do the minor repairs yourself to save money. You need to invest some time and effort in your business as it is just starting to stabilise and grow.
Professional help matters
This balances out the need to do for Do-It-Yourself repairs in the early stages of your business. You also need to acknowledge the fact that in some cases you need professional help. Concerned with structural integrity? It is best to call up an engineer. Do you see extensive electrical damage in the house? Call up a professional electrician. Getting professional help can save you money in the long term. Know when to call them up.
Be a good landlord
The key to a successful property rental business is good tenants. Make sure to screen your tenants carefully. Meet with them personally, talk to them, get a general feel of their character. If you have good tenants, you can truly enjoy the rental income coming in. If you have bad ones, your rental business can become a nightmare. When you find good tenants, take care of them, be prompt in addressing their concerns. Make sure they stay longer.
There you have it! I have covered from start to finish the property rental business cycle. Do these things and you can improve your odds of success. The journey can be harder (or easier) but by following these pointers you can be sure you are on the right path.