Although some landlords make generating copious amounts of rental income look easy, maximizing the profitability of a rental property requires more effort than you may think. So, if you’re preparing to invest in your first rental, it’s important to realize that success is never a guarantee – especially if you’re not willing to put in the effort. However, if you’re willing to put your best foot forward and go above and beyond for your tenants, generating the desired ROI with your first rental property should be well within your abilities.
Know Where to Invest
It’s no big secret that rental properties located in populous areas with abundant demand for housing tend to be more profitable investments than properties found in locales with small populations and diminished demand. So, if you’re looking to make your freshman foray into rental property ownership a financially rewarding venture, you’d do well to limit your scope to properties found in opportune areas.
When seeking out prospective properties, look for areas with booming populations, strong growth projections, robust economies, favorable job markets, low crime rates and good schools. The ideal location will also feature strong property values and rental rates. Additionally, brushing up on these factors will ensure that you have all the info to make a fair offer and an educated investment.
If you’re having trouble finding opportune areas in which to invest, reach out to a highly-rated real estate investment company. Not only will they be able to educate you on the differences between profitable and unprofitable locations, they’ll also be happy to address any other real estate-related questions you may have. For example, if you’re curious about core, core plus, value-add, and opportunistic real estate investments, don’t hesitate to get in touch with knowledgeable pros.
Be Meticulous in Your Screening Efforts
Screening rental applicants is among the most important tasks you’ll need to tackle in your role as a rental property owner. In many cases, prospective tenants are able to paint a very flattering picture of themselves during over-the-phone and in-person interviews, prompting many landlords to go with their gut and forgo the screening process. However, this is a bad idea for a variety of reasons.
First off, depending on your locale, evicting tenants for nonpayment of rent can be a stressful, time-consuming and expensive undertaking. This means that if you mistakenly take a chance on an unreliable tenant, you’re liable to feel the effects of this error in judgment for a very long time. Needless to say, if a tenant isn’t paying rent, their unit isn’t generating any income for you. Secondly, failing to properly screen applicants with extensive criminal backgrounds stands to place the safety of other renters and the property itself at risk.
So, no matter how bothersome you find the screening process, it’s imperative that every rental application you receive be thoroughly vetted. Looking into credit scores, employment situations and criminal backgrounds (with each applicant’s permission, of course) can save you a tremendous amount of stress and reduce your chances of taking on problematic renters. If you lack the bandwidth, patience or inclination to personally carry out the screening process, take care to entrust it to a highly-rated screening service.
Work to Keep Tenants Happy
All rental property owners should strive to keep renter retention rates high. Unsurprisingly, if you consistently place tenants’ needs on the backburner and regard them as nothing more than a source of passive income, your retention rates are likely to wane. With this in mind, make a point of promptly responding to all tenant communiques, staying on top of property maintenance and displaying the utmost courtesy in every interaction you have with your renters. Property owners who don’t have the personal bandwidth to devote themselves to the role of landlord would do well to entrust these tasks to a dependable property manager.
There’s no question that rental properties can be immensely profitable investments. As such, there’s no big mystery as to why some families maintain the same rental properties for generations. Still, first-time investors shouldn’t take this to mean that every rental property they happen upon is going to instantly make them rich. It’s also important for these individuals to understand that a fair amount of work goes into ensuring the profitability of even the most desirable rental properties. So, if healthy returns are what you’re expecting from your first rental, take care to consider the tips outlined above.