HOW TO SPOT A WIN: WIN RENTAL PROPERTY

If you want to build up your property portfolio on the assumption that any rental property will fit the bill – you could be in for a shock! There are various factors to consider when investing in a specific rental property and you must move forward only after ticking all the boxes. Lucrative as some rental properties may seem at first glance, only after taking ownership will the realities surface. You will spend time dealing with property and tenant issues nonstop. They will present problems throughout the tenure of ownership and impact your bottom line, even as you try to liquidate them eventually. Buying the discount property a few towns over from where you live will no longer be the good idea it seemed at the time.

But the right rental property can completely change all that, generating handsome returns over the long-term. Use our tips to spot a winning proposition.

The difference between Deals and good deals A rental deal may look great when presented to you on paper but the realities could be very different. With rentals, Rentability is the first thing to consider, leading to the type of tenants the property will attract. A rental in a poor market will invariably generate poor tenants. A better property in a better area will get you the desired rental. Know the difference and be prepared to pay a little more if you need to.

 Negotiate the lowest purchase price Every dollar on a rental deal is important. Contrary to what some investors believe, purchase price is just as important on a rental property as on a rehab deal. If you will finance your purchase with a bank loan or mortgage, a higher purchase price will increase your monthly outgoings and lower your cash flow. If on the other hand, you can negotiate the price 5% lower than the market value, you will reduce not just your capital requirement but also your cash flow. Don’t cheap out on a good deal, but at the same time, try to negotiate the lowest purchase price.

Focus on rentals dollars Always shortlist properties with the maximum cash flow potential. With a flip, all you need is one interested buyer to make an offer, based on the property’s evaluation – and it is done. But it is a different ball game when it comes to rentals. A new kitchen or updated flooring may make the property look great but it may not convince prospective tenants to pay more than fair market value.  200 lost rental dollars every month will hit your cash flow by 12,000 dollars in 5 years! That could amount to 15% loss on a 100,000-dollar home.

Saleability Before making a decision, you need to consider where the property will be a few years down the road. Simply basing your decision on current market trends and sales trends is a risky way of going about building your portfolio. Against a backdrop of ever-fluctuating real estate trends, it is hard to predict when the bottom will suddenly drop out. What happens then? Are you going to be in a position to sell for a higher amount? Or atleast break even on your investment? Location, commercial development and overall land values will affect your property’s market value, but without upgrades your property won’t rent or sell for top dollar. Traditional home buyers will consider the same probabilities when evaluating your property, as potential renters. Budget the cost of maintenance and upgrades to your property in the interest of saleability.

Have an exit strategy Most buyers don’t think about the worst-case scenario but truth being told, the best of rental properties eventually run their course. Despite best intentions, you may face a situation where you may have to cash out on your property. Hopefully you will never get to that stage, but if your property is limited in its appeal to find the right buyer, a quick sale is highly unlikely. You will have limited rent flexibility and if you decide to sell, the market won’t allow you to get top dollar. Always have Plan B in place, based on the worst-case scenario.

All rental properties are not created equal, but knowing the difference makes all the difference!

SIMPLE TIPS TO INCREASE THE VALUE OF YOUR RENTAL PROPERTY.

MAKE MORE MONEY ON RENTALS.

Enhancing the face value to a property is a proven means to justify a higher rent. Fancy upgrades, landscaping and major overhauls can cost a bomb, and do not really contribute to increasing short-term rentals. But these simple tips can add demonstrable value. Make sure to include them with your new leases, and the money will start to come in!

Exterior image: Just drive up to your property and notice the way it looks! A bad first impression can be the first thing to put off potential renters. Focus on the exterior to enhance visual appeal by visual elements like landscaping, patio, and the actual entrance. Front doors are often overlooked, but in fact are one of the first things people notice. Re-painting, oiling the hinges and re-alignment are things you can do yourself. A little detailing on the signage, lighting and frame can make a huge difference. A simple power-wash can take years of the exterior and you will be surprised by how the property looks. A fresh coat of paint to the shutters and windows can add the finishing touch. And make sure the shrubs are trimmed so renters can actually spot the garden hidden away…it is important!

Living area:  Brighten up the living area. Do away with pre-conceived notions of “Neutral is nice” and don’t be afraid to create a feature wall in earth-brown to set off the eggshell walls. A console table or a decorative mirror near the entry can add a nice touch. Invest in a nice light feature to lighten up a dark spot and bring out the hidden space. Consider lining up elegant planters, if you have steps leading up to the entrance. Shine up the window glasses and pay attention to molding. Replace the aging couch and get a couple of rugs to give your property a ‘Lived-in” feel! These will not set you back over a $1,000 but will completely change how a prospective renter views your property. Renters mostly have short-term needs and will go for a house that feels as much like home as possible.

Flooring: Flooring is one of the most noticeable items and its condition is often the reason why rental properties lose demand. Hire a cleaning crew to give the carpeting a professional clean-up. Work out the cost to see if hardwood floors may be an option though maintenance-free Laminated wood flooring can be a cheaper cost- efficient substitute. Hardly takes a couple of days to put in and can last for years! Often your home-furnishing store will offer a rebate on installation and even consider removing debris for you. Flooring should come across new as possible, as it can often be deal-breaker. Decide wisely!

Added extras:  Believe it or not, the condition of appliances can give a strong indication of the state of the property. A 15-year-old, noisy air-conditioner hardly builds up the comfort level, even though it may still work. Busted alarm systems and partially-functioning outdoor lights are not things you want potential renters to stumble upon. You see, renters like to feel they own the house they will live in and new appliances and equipment give that feeling. Make sure to get the pros to go over the HVAC, electrics and plumbing before concluding your next rental lease! You will be surprised at the additional dollars you can command for your rental property, together with peace of mind for both, yourself and renters.

If an “Ultimate Chill-out” pool is the BIG sales pitch, it needs be exactly that. Of course you will need to walk the fine line between thousands of dollars in a new pool, or cheaper repair alternatives, but in the end, your proposition must ring true. Last but not the least, be attentive as a landlord. Renters only want to feel at home, and being reachable is an important aspect of that. Happy renting!