New in the path of establishing a real estate business in rental property? It is very easy to lose yourself in the way of becoming a landlord of a rental property. You need to have a clear mindset and action plan to make your business turn into a successful venture. If you are eager to find the right approach to establish yourself as a landlord of a prospering rental property, then you need to read this piece. It includes the right process of getting the duty of the landlord straight. A way, that allows you to manage the rental property well.
Buy, then repair
If you are looking towards making your property into a worthy investment venture, you must find those properties that are not in great shape. Yes, you read it right.
Buying those properties that are not properly maintained have two benefits;
- Firstly, you can buy them for three fourth of their actual price. You can bargain well in such properties and get them for a great price.
- Secondly, after doing a little of work on them, you can fetch a great market price. This way you have a win-win situation.
No matter how good is the property that you are going to buy, you would want to make a few changes. People rarely get a well-furnished dream home. If you can get your hands on such a property, the prices will be very high. To have a profitable rental property business, you need to find a good one, in the best location, for a low rate.
Once you buy it, a few changes here and there will be good enough if you are going to rent the property.
Setting up of price and expectations
If your touching upon the property is done, now you can think of bringing it to the market. It doesn’t take much longer for people to know and swipe the best property out of the market. If your property is well-maintained and is quoted correctly, you won’t need property management companies to find you, great tenants. They will automatically get attracted to your property, saving you extra bucks.
So, before you can bring it to the market for business purposes, you need to get a few things straight. First on the list is market research. The price of the place is an important aspect of any property management business. If you overestimate or underestimate the rate of the locality, you may end up having vacant space for a long time. This could be bad for business. Instead, you could run good market research and go on to utilize it to set the perfect price of the property.
So, research the average price of all the apartments and property in the area and the availability of other rental properties in the area. You must have done a part of it while buying the property in the area. Here is a list of things that you can make out by doing market research of the area, such as:
- What is the average income of the people staying in the area?
- What is the average number of family members the family staying in this area has?
- Average rental price of the properties?
- Extra benefits that are attached to the property such as closer to metro services, bus lines etc., can help you charge more for the property.
Nobody will be interested in your property if the rental is more than what other properties in the area are quoting. This can disrupt the roots of your business. So, make sure you get the market research done carefully before setting the price and expectation of the rental property business.
This is just a part of it. If you are into the rental property business, you would know that tenants also play a big role in getting this business right. What kind of tenant are you targeting? Is it a shared residence for a group of students or a family of four? These types of questions can be answered only by doing some market research. If it is not done, you may try to rent your property to the wrong group. You might have already prepared a list in your mind about the ideal tenant you want for your property:
- Smoker or non-smoker
- Minimum credit score
- Employment requirement
- Minimum income
- Number of references
- Pet or no pet policy
- Past rental history, etc.
Consulting a good property management company for this purpose will be very beneficial. They know how to do it and make your rental business a success. A minimal pay and in no time your problem gets solved.
Rent the property
You have finally brought your property into the market. Now starts the most difficult yet exciting part of the rental business. Finding the right candidate for the property is a tricky condition. First, you need to start by advertising the property properly.
You can take the help of any medium, however, you can. If you can spend some capital to advertise your rental property, it will be worth it. There are two to advertise about your property:
- Choose a site where you can add listings of your property with all the relevant details.
- Find a property management company to do it for you.
The first option may take a lot of time, money, and patience. But it is not guaranteed that you will get the expected results. Whereas, if you are interested in getting quick results you may better take the help of property management companies in the area.
Getting just any tenant is not enough, you need good, ideal ones who will protect your property while they are staying there. To find good ones you may have to take the following route:
- Run a background as well as a credit check
- Confirm tenants’ income and employment location
- Checking with their former landlords
- Check with their references
- Having a one-on-one conversation will be the best
Sometimes even after following the protocol, you may miss and make a loss of judgment. It is always good to have a third-party opinion when it comes to taking in tenants. In this phase, you can take the help of tenant screening services provided by the property management service providers. They do a good job of finding the right candidate for your rental property.
Maintain and check
As soon as the tenants move into the property, most landlords think that their work is over. This is wrong. After your tenants have settled in the place, make sure you visit them once in a while. This will help you maintain a healthy relationship with them and check if your property is being maintained properly in your absence.
There are many occasions and reports where tenants destroy the place if the landlords don’t take interest in the property after accepting tenants. Your role may become passive as tenants come into the picture, but your responsibilities never end. In case of any issues, you will have to help them out.
You can either visit them monthly or twice a year. But be open to help them whenever the need arises. A timely walk-through will prevent tenants from causing any damages to the property.
Collect rent on time
You have kept tenants in your property to have a passive line of income. It is of their prominent duties to collect rent on time. Some of you may have taken a mortgage to buy the house, or to get the repairs done. You can cover those using the rents that come in every month. If you are not particular about getting the rent on time, your mortgage may lapse, or you may be charged with a fine. To avoid that, make sure that your renter makes rental payment every month on time.
You can use the traditional cheque method, or utilize the modern electronic rent collection services through which you can receive rent instantly. There may be a small processing fee, but you can include that in your rental fee.
You may want to understand the rules and regulations attached to raising rent, the addition of late fee charges, etc. This should be notified to the renter beforehand or mentioned in the lease or rental agreement. Surprising your renter this way can cause disputes. To avoid this, you can inform them in advance.
Accounting and Legal formalities
When you are dealing with business, it is obvious to have legal troubles. Having a rental property requires its own set of legal formalities and accounting issues. For a normal person, it can be difficult to understand the intricacies so, you can take external help. For accounting and legal help, you can trust a property management company to be a good solution. In case you are planning to handle it yourself, you can appoint an account as a freelancer to check your work. This could be real trouble if not handled properly and carefully.