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NOT EVERY GOOD PROPERTY MAKES A GOOD RENTAL PROPERTY!

Real estate offers many investment formats, though the most commonly known are rehabbing and flipping. Building a portfolio by acquiring rental property is also a good investment strategy but remember – Not every good property makes a good rental property! When considering purchasing a rental property, it is important to focus on aspects that can make a rental property stand out.

Location. Location. Location. This is the gospel about any kind of real estate property, be it rental, residential, commercial, retail or investment. If a property does not have a favorable location, you can be sure, demand will invariably be compromised. Put yourself in your customers shoes. Since rental decisions are based on first impressions and perceptions, the smallest negative can set back long-term rental values. Unlike short term flips, with a rental property a five to ten-year horizon is ideal, meaning you need to have a long-term perspective for the area you are buying in. Talk to other owners in the area to see if they have insights on future development plans for the area. A planned new school, or medical center or even a commercial development will certainly bump up holding value over time.

Rental property goals. Before jumping in, it is advisable to have a clear fix on the short and long-term goals for the investment, since they will determine the level and kind of work you will put in and future upgrades you make. So, the question to ask is – Am I looking to generate monthly cash flow or long-term capital gains? If you only plan on renting out the property for two or three years, chances are you will keep away from expensive upgrades. On the other hand, if you are planning on renting until the property is free and clear, you may consider upgrades and repairs that will enhance curb-appeal and perceived property value. The right decisions will help maximize returns and most likely impact your future investing decisions. Sometimes a sudden jump in value can tempt you to sell before the anticipated ten-year horizon. Or an unforeseen financial circumstance can force you to liquidate. The best of plans can change along the way, but your goals will help you these changes.

Financial considerations. For a rental property, financial considerations are all important. New investors may not have an idea of all the costs associated but should take into account property management costs like utilities, landscaping, repairs and other items. Even the cost of vacancies, should be factored into the overall cost of ownership, which includes beyond loan financing, mortgage, interest amount, taxation and insurance costs. The more you know about comparable homes in the area, the better equipped you are for determining rental value for own property. Take time to talk to agents to get the lie of the land. And if you are planning on getting a property management company onboard, make sure they understand the scope of work involved in managing your rental. That way, you can come up with the real cost of ownership and yield.

Understand your market. Before finalizing a purchase, spend time to understand what investment into the property will yield the best return? Tenants will invariably seek out the most comfortable option, but not necessarily be ready to shell out the extra dollars! Take time to research what’s on offer in the area. Understand what it will take to keep your rental occupied with minimum vacancy gaps. People like to rent homes they are comfortable in, but not willing to pay the extra price for it. Not always! Renters will often place a premium on a driveway, and a garage. Consider investing in one if it will allow you to charge a higher rental and ensure your property retains demand. An outdoor patio may seem like a good idea, but if the cost of putting one in, does not justify the small rental gains, you’re better off without it.

A good rental property is indeed a good business proposition and can help grow your portfolio. But get to know everything about the property and the market to get the best return on your investment.

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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!

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