With fewer people buying homes, the real estate industry is now looking at rental properties as the primary driver of profits. What’s great about starting a property rental business is that it can act as your passive source of income. You also benefit from making sure that your property increases in value. While there is profit to be earned in property rental, you should also be aware that it does come with risks. The key to minimizing your risks would be to learn how you can start your property rental business well. Here are some tips:
1. Join a Rental Property Group
Before you start renting out your property, it would help if you can join groups where you can get insider tips about the real estate industry in your area. Expanding your network can help you get long-term tenants or even property investors to help you jumpstart your business.
2. Choose a Market
One of the critical things you must understand about the property rental market is that location plays a huge factor. For example, if you’re looking at targeting family tenants, you should look at fourplex properties located near schools and work hubs. Remember, if your rental property is located in an ideal area, people would be willing to pay a premium.
Moreover, you should also be aware of an area’s long-term potential, not just what is currently offered. This will help you get a good deal on properties. While factoring in the location and the housing market, you should also consider how you plan to manage the property. There’s no hard and fast rule about how close you should be to the market you’re planning to invest in, but you have to think about maintenance and management, including improvements and repairs you need to make.
3. Consider Financing
If you’re still short on money but have already identified an ideal location with great potential, don’t let your finances become your bottleneck for success. Do your due diligence and consider financing and how it can help you acquire the property that you’re eyeing. Ensure that the interest and monthly payments would not be over the rental income you’re going to earn. If it is, then there’s no point in investing in that property. If that’s the case, you may want to consider getting partners and investors to help you out until you get the money you need. Get the help of an accountant or a financial advisor to guide you.
4. Hire a Property Manager
If you’re clueless about property management, then it’s best to let the experts take the reins. They’re the ones who understand the market, and they’ll make sure that you’re going to get your rental money in time. While they may take a cut from your income, they’re ideal to have if you don’t have time to visit your rental properties or you don’t want to deal with difficult tenants. They’ll also make sure that your properties don’t remain vacant for an extended period. Property managers are also responsible for ensuring that your property remains in optimal condition. They will screen all requests for repairs and check if there are any maintenance issues they need to address before having tenants move in.
5. Diversify and Systematize
While it may be ideal to have one type of rental property in your portfolio, diversifying is always the best strategy. If you already have a residential property, try investing in commercial ones. Go for warehouses, cafes, and even co-working spaces. As you do your research in your area, try to look at what ticks. Who are the most prominent consumer groups in your community? Are there students within your property? If so, then invest in a dormitory. Add a bar and restaurant property as part of your rental portfolio. If your area has delivery hubs, you can also get into transport rentals.
Aside from diversifying your rental properties, you can also systematize them accordingly. For instance, if your rental property is near urbanized areas with higher-income residents then, you can go for high-end properties offering premium amenities. However, lower-income neighborhood or university town properties should have more flexible offerings.
Whatever you choose to do, conduct a market study first in order to determine the demand. From there, you will have the upper hand on how you can address the gaps in the market. In addition, remember that no matter what type of property you wish to rent out, do a background check on potential tenants. This way, you can protect your rental income in the best way possible.