Investing in rental properties can be just as scary as it can be lucrative. Are you having troubles finding what direction to land your first step in this Real Estate Investment Journey? In this post, I will draw a basic road map to help you reach your Investment Destination. This article is for beginner investors seeking to invest in rental property.
Location, location, location!
This is an oldie but goodie. Location is key to finding a rental home to purchase. I'm sure you've heard the "dollar per square foot" term before in the Real Estate Sales World. Rental homes are valued per square foot as well dependent on their location just like a Real Estate sales Transaction is. Each zip code has a general market value calculated for every square foot. A knowledgeable Property Management Company will have the tools to calculate this value to the cent per square foot for you.
Believe it or not, there are different trends for larger units compared to smaller units. For example, if you are purchasing a 1 bedroom property, be sure to choose a location close to transportation, restaurants, downtown, etc. For larger units, the investments property would tend to cater to families. In this case, the location should be close to grocery stores, parks, and desirable school districts. Location will set your rental units apart from other in less desirable areas. It can make your property stand out among others, and a good location will make up for that outdated kitchen or storage issues. Renters typically select their home based on location first, and other features second. You can't remodel the location so make sure to put the most thought into the location of your investments as opposed to the upgrades.
Is it Ready to be Rented? Tic Toc
Your vacancy rate and renovation costs will impact your year end returns significantly. It is important to fill your vacancies as quickly as possible to maximize your return on investment. Ideally, your property is rent ready with little to no work. You can find a property manager before escrow closes and start the advertisement immediately and have your first rent payment within weeks of closing. If you purchase a project it will be just that... a project. This means it could than planned, Minimizing your Return on Investments. Leave those timely projects for the flippers. You've got residual income to make. Remember Time is Money. Tic Toc.
Is it already rented? Not always Trash to Treasure
Purchasing a property that is already rented is the most effective way to buy Investments properties. It will yield the highest ROI providing instant rental payments. If you do your research, it could also be the safest way to invest in real estate. Reaching out to current Property Management Companies and inquiring if any of their investors are ready to liquidate their real estate portfolio is a great way to start your search. Just as you are ready to begin your investments property journey, there may be somebody ending theirs. If you are lucky, you can find a property that is already rented. This approach is a win-win. You can close on the property and start collecting rent immediately. The referring management company will more than likely have an established relationship with the tenant and know the history of the home. This saves you time on interviewing and selecting a qualified Property Management Company. Make sure to review the current lease with the tenant and payment history to ensure that the tenant is a qualified tenant. Qualified tenants that have long term plans to stay in the home add value. Some are skeptical on this approach as they question why the current investor is selling. Is it too good to be true? It is important to consider that this investor may have had a long fruitful history with this property and simply just is ready to cash out. Ask to see their year-end profit and loss sheet from their current management company for the last few years. It may not be Trashed but certainly can be Treasure.
Is it even rentable?
Some subdivisions and planned communities do not allow renters at all. It is important to look in the bi-laws and determine this before purchasing the property. Most single-family homes don't come with rental restrictions unless they are in a subdivision with an Home Owners Association. While HOA's are designed to protect their community, this protection tends to be more geared toward owners occupying the property instead of their renters. The issues between HOA's and investors and their renters stem from their fear of the property values lowering because of the lack of property maintenance and or lack of pride of ownership a renter might come with. This is a large misconception that can be squashed with the representation of a reputable Property Management Company with a track record of finding qualified quality tenants. A good property management will also have established relationships with many of the different Home Owner Association management staff.
If you're considering purchasing a condo or townhouse, check on the rental restrictions and application process. Some communities have a ratio of renters to owner occupied units that they need to maintain. Others have a screening process for tenants while others may not have any rental restrictions. Be aware of what the application cost, process and turn around time is. Some Associations only approve applications once per month. Many tenants can't wait a month to be approved as the typical search starts about 30 days before they need to move. Be careful when selecting a community with no rental restrictions. A community that is selective with its residents will provide a safer environment for your future tenants. Safety is one of the most important factors prospective tenants look for. Finding the right community with the right restriction have a positive impact on the value of your investments home.
- ARE YOU HAVING TROUBLE FINDING WHAT DIRECTION TO LAND YOUR FIRST STEP IN THIS REAL ESTATE INVESTMENTS JOURNEY?
- Why You Can Trust JML Realty Investments to Manage Your Orlando Rental Property
- The Best Tenant Screening Process for Your Orlando Rental Property
- What to Look Out for When Hiring a Property Manager in Orlando
- Know Your Landlord Rights When a Tenant Won’t Let You Show Your Orlando Investment Property
- JML Realty Investments, LLC
- JML Realty Investments