Real Estate 101: How to Find
and Manage a Rental Property
According to Inc.com, real estate is within the top 10 most profitable industries with more than a 12 percent net profit margin. Even though the profitability of property investments is a well-known fact, many people shy away due to a fear of failing or a misconception that only wealthy people can find success in the field. In reality, owning a rental property is another form of investment like any other with recurring revenue. Your real estate efforts don’t have to generate millions in order to be considered successful; it’s all about taking that first step. Here are some strategies to help you find and manage your first property.
Choose an attractive area.
Location is an important consideration for first-time rental owners. When choosing a property, make sure to find something in an attractive area and be deliberate about the selection. It’s critical to consider the upsides and downsides of each place and choose the one that fits your needs while remaining in budget. Wherever you set up shop, be sure to point tenants to the popular destinations that make your rental a steal.
Determine your target demographic.
As with any type of business, it’s important to know your target audience before making any critical decisions. It’s not enough to simply purchase an attractive property and expect everything to automatically fall into place. You must decide whether you’ll be catering to families, young couples, older individuals, or college students. Additionally, you should decide between focusing on long-term lets or consistent, short-term contracts. Knowing your target audience will help inform every major decision regarding your first rental property. Considering the size, location, and price of your property can make it easier to decide which target demographic is most suitable.
Consult a calculator.
Every homeowner knows that it takes a seemingly endless number of calculations to ensure a real estate investment is financially sound. When it comes to securing your first rental property, you’ll need to make even more calculations given the increased complexity of such an investment. While rough guesses work for brainstorming purposes, you’ll have to break out a calculator and spreadsheet for the final decisions. First and foremost, you’ll need to determine whether you have sufficient funds or borrowing power to afford the property without putting yourself in jeopardy. You’ll also have to figure out if the required investments on the property are worth the potential return. Finally, you’ll need to calculate an appropriate rate for tenants.
Set up a division of labor.
Rental properties require a significant amount of management which many first-time investors fail to consider. Many are under the false assumption that a rental property translates into instant income with minimal work. In reality, you’ll find yourself managing some aspect of your rental at least once per day. To make these responsibilities more bearable, divide the management requirements among your team. If you entered into the investment with a partner or a group of investors, find a way to equally distribute the maintenance, bookkeeping, banking, and other tasks. Property managers can always be hired if you lack the time and energy to handle these duties. The right management company can arrange for between-guest maid services, seamless online booking, and high-level tenant screening.
Not everyone who enters into real estate has an interest in making a living from their properties. Many people are simply interested in improving their financial situations with a single house or apartment. These tips can help you find success with your very first property.
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