Rental properties are a great way to build your long term investing portfolio. Not only can they provide monthly cash flow but they offer long term appreciation potential. As high as the upside is not every property will be a home run. Purchasing the wrong property in the wrong market will do much more harm than good to your business. Fortunately there are a few things that you can do that will greatly impact your bottom line. If you remember these items with every purchase and on every lease you will be much more successful. Here are five things you can do to get the most out of your rental property.
- Look For The Right Property. Your rental property success starts with the purchase. Not every property makes the best rental property. If the property is not in a solid market you may have a hard time finding tenants. Even if you can find tenants you may not be able to get top dollar rents. You need to look at markets that are on the way up and hold maximum appeal. These are areas with expanding job markets, strong schools and low crime rates. Once you nail down a market you need to focus on a specific property. You should think like a renter when looking for a property. Look for properties that are easily accessible from highways and major roads. Driveways, garages and storage are typically deciding factors for renters. You will pay a premium for better properties but in the long run they are worth it. With any rental purchase you need to focus on the bottom line. The lower you can purchase the property for the higher your cash flow will be. Just like you can’t put perfume on a pig you can’t make every property a solid rental property. Everything starts with the right property.
- Good Tenants. You can have a great property but if your tenants are poor it doesn’t matter. Good tenants are the single more important factor in your success. A good tenant will make owning a rental property as easy as possible. On the flip side dealing with a bad tenant is a nightmare. While you can never truly know who you are renting to you need to put the time in to find out. There are many landlords who skim through the application process. When the tenant stops paying a few months into their lease they are caught off guard. You need to put as much time into tenant due diligence as you did purchasing the property. Look at the tenant application and reach out to any references. Call their current landlord and employer. Take a look at their credit report and see if they can comfortably afford the payment. These few extra steps will give you a much better idea of who you are renting to. Taking the time to rent to better tenants will make the duration of the lease as smooth as possible.
- Management. The next step for rental property success is management. There are many different ways you can manage your property. Some landlords don’t mind managing the property on their own. Others prefer to let a professional property manager handle everything. Either way you need to have someone actively manage the property. Regardless of the tenants and where the property is located issues will constantly pop up. Most of these are minor in nature but they still need to be dealt with in a timely fashion. Handling these quickly builds credibility with your tenant and increases the likelihood they will take care of your property. The longer you make them wait the more they will doubt your competence as an owner. Instead of making the commitment to pay their rent on time they will begin to lag. They may also no longer treat the property like their own. All this is avoided with solid property management.
- Maintenance. Maintenance and management typically go hand and hand. Dealing with phone calls and handling minor issues may be nothing more than an inconvenience. Dealing with repair issues and maintenance is a necessity. It doesn’t matter if it is a clogged toilet or a running faucet if it is important to your tenant it needs to get done quickly. You can’t have your tenant wait until you free up capital to get work done. Not only is this bad for your tenant but it could end up costing you much more down the road. By handling minor maintenance items as they come you will preserve the long term life of the property. Running an efficient rental property means staying on top of maintenance as soon as it comes your way.
- Annual Updates. Your rental property does not run on autopilot. At the end of every lease you need to take a look at where you stand. This means digging into your current lease and seeing if it is updated and still effective. The same should be the case with your insurance. If something happens are you protected? You also want to look at other rental properties in the area. If rents are on the rise it may be an opportunity to increase yours. You should also take a look at your rental policies and see if they still fit with your vision of the property. Lastly, you should review your taxes and see if you are maximizing any returns you received. A lease term may not seem like long but plenty can change in a year.
A strong rental property can be the backbone of your investing business. Take a look to see if you are running yours as efficiently as possible.
