There are multiple incentives to get into the real estate business. According to Mashvisor, rental properties are the most common entry-level investment in the real estate business. As a beginner, you could learn the ropes of renting properties and scale up to other types of real estate business and investment in general.
According to CNBC, the demand for rental property is increasing steadily due to the increasing cost of owning a home. In other words, the home affordability challenge is one factor pushing most Americans to rent. As a supplier to the demand, your income capability is limitless. You can provide a home for a potential individual or family.
If you want to start rental properties, you probably want as much helpful information as possible. Valuable information will help you avoid common mistakes and rise above competitors. In this article, you’ll learn the best way to start renting properties and how to get your property ready for renting. Let’s delve right in.
Best Way to Start Rental Properties: 7 Guiding Tips
The best way to start rental properties is to research and gain practical information. You are already learning by reading this article. Some people make the mistake of diving in too deep, too fast, with little or inaccurate information.
While the real estate market has gaps only rental properties can fill, some people have great success while others struggle to pick up the scraps. According to Statista, most Americans prefer single-unit family homes or apartments with about five units.
You need to be strategic and informed if you plan on converting your home to a rental property. Here are seven tips to guide you if you are looking for the best way to start renting properties.
1. Research Your Target Market
The best way to start rental properties is to understand your target market. You may have a narrow or diverse target market depending on your property type and location. For example, suppose you own a home near a touristy beach. In that case, your target market may be people looking for a short-term rental vacation home.
As a beginner, you don’t have expert knowledge of real estate markets. But don’t fret. You can easily learn what’s in demand. Research what property owners in your neighborhood do with their property. Are they doing long-term or short-term rentals? What kind of listings are you likely to get in your location?
2. Consider Niching Down
Once you know what your target market is looking for, you can choose to niche down to fit a specific niche in the market. The advantage of specializing is you can easily customize your home to fit a potential audience. On the flip side, niching down too much could keep some potential tenants at bay, so learn the balance.
3. Start with Property You Own
The best way to start rental properties is to start with your property. It’s easier to experiment and study the market. It will also be kinder to your pocket. In other words, you have a leeway to make mistakes without incurring massive losses. You can convert one to a rental property if you own two homes. For example, if you have a family unit in the suburbs but live in a townhouse, you can rent the family unit on a short-term basis.
If you only own one property, don’t fret. You could still rent out part of your home if you are comfortable sharing space. For example, say you have five rooms but only use four. You could convert one room into a stopover for backpackers and then list it on Airbnb. There’s a market for every kind of rental property.
4. Make a Marketing Plan
Unless you have had a long-spanning career in marketing, you may not realize the power marketing holds for your rental property. You could have the best property, but you won’t have an ideal return on investment if potential tenants can’t find it. Yet you don’t need a marketing degree to know how to position your property before prospects.
If you choose a short-term option, you could list your property on online platforms such as Airbnb or Booking.com. Your home will be easily visible if you follow good practices, such as having good photos and responding to messages instantly. If you are looking for a long-term option, having a real estate agent will help you reach their broad connections in the industry.
5. Plan Time for Managing Your Property
Despite the popular notion that real estate income is passive, managing rental properties requires time and resources. Even renting out one home will require you to work long hours to succeed. If you have a busy career or family life, you could opt to do long-term rentals. You will put in fewer hours and attention and get a steady cash flow.
You could also opt to have a property manager take care of the nitty-gritty aspects of managing a property. However, if you plan on doing short-term renting, such as listing on Airbnb, you will need to dedicate more hours to responding to guests’ inquiries and needs. Alternatively, you could hire a virtual assistant and pay them per hour for efficiency.
6. Plan for Maintenance and Servicing
People are willing to cough up more if it means having a tap with constant flow, a clear driveway, or a serviced swimming pool. So if you’re looking for the best way to start rental properties, don’t neglect maintenance and servicing. It may reduce your cash flow in the short term, but it is worth it in the long term.
You could use a planned maintenance approach that involves scheduling at intervals. Alternatively, you could immediately respond when a tenant notifies you of an area requiring servicing. Maintenance will help increase the value of your property or at least prevent it from deteriorating.
7. Learn about Local and State Real Estate Laws
If you want to start renting on the right footing, follow local and state laws on renting out property. Rental laws differ from place to place. For example, rental laws in New York make hosting an Airbnb quite restrictive. The state has a requirement that you must rent out your property for 30 days or more.
Some local laws will require that your building be safe and fire and pest-proof. Rental laws might also affect contracting, so you should check with your real estate attorney to ensure you operate within the law. Keep all documentation safe so you can easily access it if need be.
Getting Your Property Ready for Renting: 8 Tips
Now you have some effective guiding tips on the best way to start rental properties. Now, it would be best if you made your rental ready for tenants. You could turn the dullest properties into exciting spaces people can’t wait to rent. To make this dream come true, you must first prepare the property.
If you’ve been using the rental property, you may have learned to live with certain inconveniences, such as a leaky pipe, a faulty AC, or a messy yard. Yet the competition in the rental market will be challenging to penetrate if your home looks uninviting and dull.
Even low-budget tenants look for value for money. Here are 8 tips that will guide you on the best way to start rental properties by preparing your property.
1. Patch Up the Roof
Your roof is very visible. A prospective tenant will be worried if they find your roof leaking or looking dull. Some signs you need roof maintenance are colored patches on the roof underside, streaks of light, and mold developing on the roof. Investment in your roof might not give you a 100% return on investment (ROI), but it will keep potential clients from walking away. In fact, you could get a 60 to 68% ROI.
2. Pave the Driveway
Another effective tip to attract prospects is a clear and well-maintained driveway. No matter the tenant’s budget, no one wants their property to look like no one takes care of it. If your driveway has potholes and rough edges, it’s time to call asphalt paving services. Since the driveway is one of the first places potential tenants will interact with, it will leave a good impression.
3. Clear Out the Pipes
Unless your home is new and every plumping fixture is new, you might consider drain cleaning to clear the pipes. That doesn’t mean that your pipes are clogged. But you would be satisfied if the plumber gave you the go-ahead nod if there were no clogs in your pipe. Having clear pipes will mean waste is channeled easily and effectively, an aspect your tenants will love.
4. Optimize the Heating and AC
Whether you opt for long-term or short-term rental options, having a working HVAC will make your rental a valuable option for tenants. A poorly working HVAC will only attract negative reviews of your property. Call HVAC services to optimize the AC for you. If you run an Airbnb, having an optimized HVAC will save you energy costs, according to the Department of Energy.
5. Fix Electrical Issues
Suppose you have electrical issues such as exposed wires, fixtures that don’t work, or electrical malfunctions. In that case, it will be challenging to find a tenant. If you do short-term rentals, guests will leave poor reviews. That’s why looking for an electrical company to fix any electrical issues in your home is essential. It will add value to your home and make it easier and safer to rent it out.
6. Repair the Gutters
You might also need to repair the gutters if you have noticed signs of aging or poor functioning. Remember, you intend to make your home attractive to potential tenants. Something as seemingly simple as gutters can make a prospect walk to the next listing. If your gutters have holes or are bending, call a gutter company to repair them so they work effectively.
7. Clean Up the Yard
Hire tree service providers to ensure you have an inviting yard. A well-maintained yard is a selling point in the real estate market. It improves the curb appeal and has a high ROI. According to Homelight, lawn care will give back 267% on investment. So don’t shy away from getting commercial lawn care to make your lawn appealing to prospects.
8. Clear Out Unwanted Items
If you have lived in your rental property for some time, you have gathered items that may come off as clutter to property users. It’s time to de-clutter the rental space by removing and disposing of some items. If you have items in your storage room that you feel have sentimental value, get a local moving service to deliver them to your current home. Alternatively, you could call disposal service providers to dispose of items you do not need.
Now you know the best way to start rental properties. You can begin plans to get your home ready for renting. While the rental market has a significant demand in some areas, it’s also competitive.
The seven guiding tips above will help you rise above the competition and establish yourself in the real estate business. You can chart a scaling plan as you continue to learn the market. Applying the tips you learned on the best way to start rental properties will give you a competitive edge in the market. Watch your account get fatter from rental income and laugh all the way to the bank.