Residents
Owners
Are you a property investor? Do you have plans to build a portfolio of rental properties? Surely, this endeavor can earn you large profits since the rental property market is now booming in the United States.
Many folks now want to put their money into rental properties and are eager to learn about the fundamentals of the U.S. rental market. Make sure you know about buying properties, property management, and marketing if you want to own a rental property.
Check out these tips on how to be a good rental property owner and increase your chances of being a successful rental property investor.
Learn and Understand the Market
It’s a common rule for any investor to know the market. Market knowledge is also crucial for a rental property investor, and he must equip himself with it when dealing with stiff market competition.
Market research should be among the top priorities. Without applying himself to this particular task, the rental property investor is more prone to make ill-informed decisions. For instance, if you’re planning to own a single-family house for rental in Detroit, you need to get a profile on that local market.
Get information about the geographical location of your market, population, major industries, school district, local economy, and employment rate. You’ll also need to get a profile for the typical resident in the area. Let’s say, resident John: what is his occupation, income, type of car he’s driving, how many children he has, etc.
Find out the average home price and average rent in the area. Then, calculate your target rental price for a single-family house in this particular market.
Determine the Suitable Property to Invest In
After the market research, the next step is to determine the most suitable property according to your goals. You need to identify your objectives and the level of risk you can take. If you have a good grasp of your goals and risk tolerance, you’ll get a clear picture of the type of property and the area in which to put your investment.
Say, you have $100,000, would it be wise to purchase a newer house in a booming area of Detroit? Or should you buy two older properties in a yet-to-be-developed part of the market for $50,000 each?
Consider the average rent on these different properties, their average annual maintenance costs, and the average length of tenancy.
Find a Contractor You Can Trust
A rental property owner must work with a contractor to help him get the property suitable for renting. This is a crucial pick since the contractor will handle the maintenance of the property. The choice of a contractor matters significantly because it can make or break your investment.
Choose a licensed and insured contractor who knows how to do their work. You can ask the contractor for some proof that he is state-certified. Another option is to contact the Home Builders Licensure Board in your state.
While you might be tempted to hire a contractor that charges a cheap price, it’s better to look for someone who charges a reasonable fee for quality work. Mostly, those who charge cheap do inferior work, so you better be careful.
Put an Operational System in Place
It’s a no-no to leave your rental property investment to chance. You must have an operational system that organizes and makes every aspect of your business more efficient. This way, your property rental operation will run smoothly, and you can minimize the risks associated with this endeavor.
See to it that marketing, tenant screening, property maintenance, rent collection, and eviction are systematized. As a rental property owner, you should also keep abreast of the current landlord-tenant laws in your state.
Every landlord should use property management software or hire a dependable property manager to ensure everything is in order.
Choosing the Right Tenant
The hardest part of the job of a landlord is finding qualified tenants. It’s both an art and a science, and every landlord probably has different experiences with the folks they chose to live in their properties.
Learn about the Fair Housing Act, renter’s rights, and local and state landlord-tenant laws. You must set requirements for prospective tenants, such as proof of employment, good credit history, and clean criminal background. You can also ask the prospective tenant about his reasons for moving, past evictions, whether they have any pets, etc.
The gist of the screening process is to know your tenants. Make sure they have the means to pay rent and have no criminal history.
Takeaway
Rental property owners should learn the basics of making their investment profitable. The key to success is excellent management of their rental properties. They should know the local rental market and the type of property to invest in. It’s also essential to partner with trusted contractors and put an effective system to organize the whole rental experience.
