The Four Most Important Steps to Successful Investment Property Ownership
Investment property is a popular means of passive income for many people. However, to make the most of property ownership, you need to take specific steps to preserve your house and cater to the rental market. From preparing the house to managing tenants, here’s how to become a successful investment property owner.
Leave Larger Jobs to the Professionals
Many property owners prefer to DIY to save money. But going it alone can cost more — and take longer — than hiring a professional. Plus, many aspects of renovation require specialists, permits, and careful management of hazards, explains the Spruce. For that reason, making home improvements in plumbing, electrical, or roofing areas is best handled by the pros. For example, adding electrical outlets or installing permanent fixtures are tasks a professional electrician can handle safely and cost-effectively.
Before renting out your home, you’ll need to give it a thorough deep cleaning. Since you’ll need to clean far more than just the flooring, in this case, it’s usually best to hire cleaning professionals. Hiring a service to clean your home’s walls and ceilings typically ranges from $201 to $514, with costs depending on how much dirt there is, which cleaning products will be used, and the height of the ceiling.
Invest Time in Smart Marketing
Rental properties don’t advertise themselves (unless your signage is visible from busy streets). Therefore, you’ll need to decide how to address marketing efforts, including promoting and showing the property to prospective renters. From taking out advertisements to listing your property on social media, marketing can take up much of your time. You can also post in online forums, place ads in the paper or on social media, and place a “For Rent” sign in the window.
Once you post the property online or hang signs, you need to screen applicants and select tenants, notes Moneycrashers. The process should involve a background check at the very least, but you may prefer to have interviews, too. This can be time-consuming, so many investors hire property managers to address vacancies, repair requests, and other rental issues. Also, it’s important to keep around 1 percent of your property’s value set aside for maintenance; if your property is worth $150,000, according to SFGate, you’d want to save $1,500 per month.
Also, when you place a tenant, you should set a written agreement with the terms of the tenancy. You can choose whether to allow pets and smoking, as well as establish details such as the length of the rental period and the payment method for monthly rent.
Don’t Expect Income Streams Immediately
From financing the home purchase to renovating for renters to move in, property investment is not typically a “get rich quick” scheme. You need to invest money to see any return — and that means both buying a property and making updates and repairs throughout ownership. Therefore, you shouldn’t expect an immediate return on your investment; in fact, you should probably plan for a lean first few months.
In addition, you’ll want to set aside funds for general upkeep and maintenance on the home. Unfortunately, you may also run into repair problems and unexpected costs if your renters damage the property. Of course, there are some financial benefits of rental income come tax time, but that perk might be too far off to be of benefit upon purchase of the property.
Know Your Responsibilities as a Landlord
Whether you choose to have a company manage the property or go it alone, you still have responsibilities as a landlord. In most states, you have specific rights, such as the ability to enter the property for inspections (with appropriate advance notice). You may also evict tenants who don’t follow the rules, though you must follow legal guidelines for doing so.
However, you also must maintain a safe and habitable rental, respect your tenants’ privacy, and disclose relevant information to renters, among other duties. In short, there’s more to renting a property than placing a tenant and collecting monthly rent. Whether you or your agent are handling the tenants, there are many boxes to check, both legally and financially.
Owning a rental property can be a lucrative investment. However, there are also responsibilities and requirements you must be aware of. That said, if you take the right steps (and adhere to the law), you’ll soon find that owning an investment property can be a rewarding experience — financially and otherwise.
Photo via Rawpixel
