Investing in residential rentals for the first time? Here are some tips to make your endeavor a fruitful one.
Nowadays, everyone’s talking about how it’s the right time to invest in real estate, what with the local economy’s good standing and all. For those looking for a second source of income, rentals would easily come to mind as an option. On the other hand, with real estate’s unpredictable nature, you can only make a lucrative investment out of rentals if you know how to go about it. Don’t be scared though, as it can be done. For those who are considering investing in rental properties, here are a few tips to get you going.
Tip #1 Get to Know the Location of the Property
One of the leading considerations of a person looking for a property to rent is its proximity to everything he or she needs. In this case, the rental property owner needs to familiarize him- or herself with the rental’s neighborhood. Find out where the closest schools, offices, malls, hospitals, religious institutions, and banks are, so the owner can properly market the property. Another location-related concern is safety; see if the roads leading up to the property are well-lit at night, and if the area is considered flood-prone or is at risk of earthquake-related damage, then make sure to highlight these attributes in your viewing with a potential tenant.
Tip #2 Prepare the Property for a Showing
Between a photo of an empty unit and one that’s furnished, your eyes will most likely be drawn toward the latter, and with good reason. Most people respond better to great design, which you can create with proper staging techniques. Paint the walls with clean, bright shades and hang clean curtains (but draw them back during day time to let the light in). If you’re renting it out furnished, get good-quality pieces of furniture and make sure they match the mood you’re trying to exude. Declutter all the rooms and use nice lighting. And that suspicious odor coming from the bathroom? Get rid of it before you open the doors to potential renters.
Tip #3 Bring the Property Online
Many industries are taking advantage of the power of the Internet to reach their potential market, and real estate is no different, hence the birth of real estate classifieds websites. Creating ads in these websites will help bring your property directly to those who are searching for a rental that matches your unit. And these days, it’s hard to find a person who doesn’t use some form of social media. This means there’s a high chance of reaching your potential market by making use of networking sites like Facebook and Twitter to get the word out about your property. Remember to use high-quality photos with your ads. After all, it’s the first impression you’ll be making on the prospective tenant, and you want to make sure it’s a good one.
Tip #4 Screen Potential Tenants Properly
Late rent can be a headache to a landlord, and a runaway tenant is even worse. You can avoid experiencing these by finding out how good a fit a tenant will be for your property. Ask them for proof of employment to find out if they’ll be fit to pay the rent regularly and on time. Requiring an NBI clearance will also ensure that the tenant isn’t in trouble with the law. To further ensure your candidate is the right one, ask them to provide you with references you can call, preferably their former landlord who can give you a testimony of how they are as a renter.
Tip #5 Read and Re-read the Lease Agreement
The best way to protect yourself from being taken advantage of by a tenant is preventing loopholes in the lease agreement. When drafting the document, make sure you state all essential details about your deal, such as:
- The agreed-upon monthly rent
- The amount of the security deposit
- Any included utilities and dues
- The duration of the lease
- Your policies on pet ownership, smoking inside the property, and other rules about the property
- Your policies on subletting or adding people to the lease
- Your policies on maintenance and repair
- Your policy on late rental payments
- Your grounds for evicting a tenant
- A detailed description of the property before the renter occupies the property as proof should it incur damages during their stay
Until you’re confident that everything is in writing, neither you nor the tenant should sign the agreement. Any changes to the agreement during the duration of the lease should also be in writing for legal purposes.
Tip #6 Use a Strategy When Increasing the Rent
Mention the words “rental increase” and you can almost see your tenant shaking in their boots. It may not be the most comfortable conversation you’ll have with your tenant, but it has to be done. You need to match your rates to the value of the property to stay competitive. Besides, as long as your rates are still lower than the rates of another rental plus the cost of moving, you’re at an advantage. Keep your momentum by trying this: whenever you announce an increase, tell your tenant you’re also upgrading the unit with add-ons like new plants in the garden or a fresh paint job for the exterior so they feel like they’re getting something out of the increase. Or ask them what improvements they’d like to see in the rental and see what you can do about it. Make sure you deliver when you say you’ll do something to let them know you actually care.
Tip #7 Keep It Occupied as Much as You Can
One of the most difficult things about running a rental is looking for a new tenant when the previous one’s lease ends and they decide not to renew. Depending on the condition of the market and the location, the place can stay vacant for months at a time, which means you’re wasting money on a property that’s not delivering income. Whenever you rent to a tenant, ask them to give you at least a month’s notice of whether or not they want to keep living in the property. If they decide to leave, this’ll give you enough time to post ads about the property’s vacancy so that you immediately have a new tenant once the previous one vacates.