Real estate is a stable and lucrative investment if you set yourself up for success. Whether you’re a veteran investor or are diving into real estate investment for the first time, it’s crucial that you establish processes to support your property management business. This article outlines property investment tips along with all you need to know to both maximize your investment and be a better landlord for your community.
Research and Knowledge
Don’t know where to begin? Start by researching your local market. Stay up to date with the rental trends and estimated property values in your backyard, and you’ll be better suited to spot a deal when you find one. Use an online property value assessment calculator for quick and easy research.
As you consider your next investment, pay attention to the property’s location. Consider if the surrounding neighborhoods are up and coming along with how the area could grow in the future:
- Are there new developments nearby?
- How are the schools?
- How popular is this area for renters?
These are just some of the questions to ask yourself when carefully choosing what properties to invest in. You should also define your buy box to capitalize on your investment strategy from the get-go.
In addition to assessing property value and growth potential for your investment, you must get acquainted with your legal obligations and local landlord-tenant laws. Eviction laws, late fees, repair requirements, and more impact your properties’ return on investment.
Financial Planning and Management
When investing in real estate, you must be proactive and plan for rental property expenses to make the most of your money. Not only should you plan for regular upkeep of your properties but also for any unexpected large expenses. Luckily, there are two easy ways to prepare yourself financially and ensure you maintain a positive cash flow:
- Create a budget. A budget will help you compare your income to your property expenses and set aside money for any unexpected costs. Big expenses can be surprising and become very stressful. Planning ahead with a well thought out budget will reduce any unnecessary stress and help you manage your investment more efficiently.
- Leverage your tax benefits. Regular maintenance costs, cleaning costs, mortgage interest, and utilities are all examples of deductible expenses for rental properties. Knowing your tax benefits can significantly impact your bottom line, as will understanding how your taxes change as a landlord.
Property management is service-based investment, which is why successful landlords treat their tenants how they’d want to be treated. Happy tenants lead to healthy retention rates, which decreases your vacancy cost, so it’s important to create a positive landlord-tenant relationship. To that end, you should:
- Communicate frequently and honestly with your tenants
- Strive to be respectful, kind, and friendly during every interaction
- Build a strong network of amazing, long-term tenants by offering a referral program
Of course, carefully choosing your tenants is as important as fostering professional relationships with them. That’s why TurboTenant provides online renter applications and screening reports. Comprehensive tenant screening services provide you with all the important information you need to find the best tenant for your property, based on their criminal history, credit score, eviction history, and more.
Building a positive landlord and tenant relationship is just one aspect of attracting and retaining awesome tenants. Your properties will also need periodic upgrades to remain attractive and competitive. Factor rental property maintenance expenses into your base budget, and be sure to set enough money for unexpected repairs. As a rule of thumb, plan to spend at least 1% of your rental’s worth in yearly maintenance costs.
Another item to factor into your budget is whether you will hire a property manager or self manage. While hiring a property manager might take a large portion of the regular day-to-day property maintenance off of your hands, they also will take around 10% of your income. If you would rather keep that money in your pocket, maximize your investment with an easy, all-in-one property self-management tool.
Life is unpredictable, but keeping your investment safe shouldn’t be. Insurance for a rental property protects your bottom line against property damage, loss of rental income, and legal liability. Be sure to evaluate different property rental insurance plans to find the one that fits your unique situation best.
Unfortunately, emergencies are out of your control and can greatly impact your property investment. The good news is you can plan accordingly, allowing you to act swiftly and rationally when unpleasant surprises pop up. Have contingency funds factored into your budget, and research your market to create a plan for any location-specific emergencies that might occur (like flooding or wild fires).
To further safeguard your investment, familiarize yourself with your local landlord and tenant legal protections. Stay in compliance with the Fair Housing Act along with your local laws, and your investment can keep making money for you for years to come. If you run into any complicated situations, don’t be afraid to hire a real estate attorney. You can deduct legal fees for rental property management from your taxes annually as a business expense, so don’t hesitate to ask for help if you need it.
Adhering to this list of rental property management best practices will save you many headaches and boost your bottom line. Researching the industry, financially preparing for a large investment, managing your properties with care, and mitigating any potential risks are all great ways to make sure you’re maximizing your investment for years to come.
Are you looking for a way to streamline your property management? Sign up for a free TurboTenant account today, and make every part of being a landlord easier. Our all-in-one platform has the vacancy marketing, tenant screening, rent collecting, and maintenance management you need to take your business to new heights.
Rental Property Investment Best Practices FAQs
Have more questions on property investment? We’ve got you covered!
How to Finance a Rental Property
There are several financing options available for property investors depending on your personal circumstances, such as a traditional bank mortgage, FHA loans, home equity lines of credit, group investing, and more. Research your financing options and don’t be afraid to ask your lender to help make the best game plan for your unique situation!
How to Find Assessed Value of Property
Most counties list property value assessments in their online database. You can also use appraisal websites such as Zillow, Redfin, or Realtor.com. If you already own a property, you can find it’s value through the website you use to pay your property taxes. For the most accurate assessment, consider hiring a professional appraisal consultant.
Can I Manage My Own Rental Property?
Yes, you can absolutely manage your own property! Taking control of your rental property management offers a plethora of advantages, the biggest being you get to keep 100% of the profit from your investment. However, you’ll need to be prepared to interact with your tenants, solve their issues in a timely manner, and maintain healthy communication along the way.
What are Geographic Risks of Rental Property Ownership?
Specific locations have fluctuating potential returns on investment. Many factors contribute to this variance, including the prevalence of natural disasters, your local market’s rental saturation, demographic shifts, and growth. This is why it is important to conduct thorough local market research before investing in property.
What Is The Biggest Risk of Owning a Rental Property?
In every investment, there is always the potential for financial loss. Some of the biggest risks with owning a rental property are long-term vacancies, significant property damage, legal and liability issues, and unpredictability in the real estate market. Although it is impossible to avoid all potential risks, following the above property investment tips will mitigate their impact on your investment.
How to Manage Rental Property Remotely
You can easily manage a rental property remotely with effective communication and robust landlord management software. An all-in-one property management solution allows you to receive rent payments, screen any potential tenants, maintain an open line of communication with your residents, and more from wherever life takes you. Brush up on more remote property management tips, like coordinating regular maintenance trips and inspections, to maximize your efforts.