5 Things You Should Know Before Renting out a Property
Renting out a property is a tempting entrepreneurial avenue that attracts real estate owners more today than ever before. In fact, rental homes are overtaking the housing market. According to a panel of experts at the Urban Institute Housing Finance Policy Center “Single-family rentals — either detached homes or townhomes — are developing faster than any other portion of the housing market.” If there’s ever been a good time to make your landlord dreams a reality, it’s probably now!
Make no mistake, renting out a property is an incredibly involved process that requires plenty of TLC and attention if you’re aiming to make a profit. From proper budgeting to passing a property inspection, there a number of things you should anticipate and know before renting out a property.
Before setting down any money toward a rental property or making your mind up about becoming the neighborhood’s best landlord, it is in your best interest to survey the demand in your local market for real estate. If your end goal is to make a sizable profit out of your rental property, you need to be 100% sure that the financial potential for your property is promising enough to venture into.
If demand is low, you will likely have a difficult time getting your hands on tenants willing to even check out your space. And even in the case that you do find your inbox pinging with a number of tenants, if the rate of return on your investment doesn’t project an attractive number, you might want to reconsider.
Are you sure that the property you want to lease out is rentable? Simply deciding to rent your home out doesn’t mean it’s actually ready to be rented. You’ll probably come up with a long, running list of repairs and fixes that need to be completed before a stranger’s judging eye can land on those stained doorknobs and dusty air vents. As a landlord, you have an obligation to ensure your property is perfectly livable, so mildew-y bathroom corners are huge no-nos.
Rentability also accounts for the type of property you’re trying to rent out. Check your local market to see what kind of properties are being listed.
There are a number of important outgoing costs to take into account when it comes to renting out a real estate investment property. Before getting wrapped up in the possibilities of all of the incoming costs, grab your calculator and whip out those math skills.
Insurance, advertising, maintenance, capital gains tax, and other investment property costs add up faster than you think. Though it’s not impossible to accrue a nice lump sum of cash in the first few successful months, you’ll need to learn patience before your desired cash flow becomes a reality.
Before finalizing your rental property online listing, be sure to have a grounded idea of the rent rate you intend on attaching to those gorgeous pictures of your property. Rent rates depend on a number of different variables that could heighten or reduce the amount you can feasibly charge renters.
For example, rent rates for a one bedroom apartment in San Francisco, California averages around $3,448 per month whereas rent rates for a one bedroom apartment in Memphis, Tennessee averages around $970 per month. Keep your location and competition in mind when deciding on a rent rate— it could be the very defining factor that makes your property more alluring than the next person’s.
If you have absolutely no experience with rental properties, it may be in your best interest to seek outside assistance from a professional property management company. These professionals take care of all elements relating to your rental property— effectively boosting the appeal and renter satisfaction elements without you h having to lift a finger.
If you plan to go down this avenue, be sure to be choosy with your professional management team. A good property management company will keep you consistently updated with everything you need to know about the laws behind rental properties and the state of your physical property. A good proper management company will also handle repairs, regular maintenance, evictions, finding tenants, and rent collection. Be sure you’re getting your money’s worth if you decide pro is the way to go.
Have any other tips for first-time property owners? Leave your tips in the comments below!
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Another suggestion – keep you books in order from the start. To avoid any tax issues, use spreadsheet (or even better – an app) for tracking income and expenses to make your tax declaration preparation as painless as possible and make sure you get proper tax deductions for your rental income. To keep tracking of expenses and important dates effortless you can use mobile property management app on your phone/tablet e.g. Landlordy app.