According to research, there were 44 million residents in the United States renting single-family homes in 2019.
The research also predicted that there will be a 21% increase in new rental households between 2020 and 2040.
Though investing in single-family rental property might usually offer stable and strong cash flow, owning a rental property can require a lot of hard work and time.
This is especially true if you’re still planning to purchase a rental property. If you don’t know how to buy your first rental property, here are some things you should consider:
Look for the Right Rental Property
When selecting the right rental property, there are a couple of key factors you need to think about. These key factors include:
- Neighborhood rating, including employment rates and school district quality
- Historic change in home values might result in long-term appreciation
- Declining vacancy rates and rising rent prices
- Percentage of renter-occupied households
- Population and job growth
There are tons of websites online that can help you search for a house for sale. This includes Realtor.com, Trulia, and Zillow.
Unfortunately, most of the listings are for people looking for a house. Thus, you should consider this as well.
Financing for a rental property works a bit differently compared to applying for a mortgage on a primary residence.
There will be various requirements to qualify, lender interest rates and fees are a bit higher, and down payments are bigger.
While there might be more obstacles to jump through when arranging the financing on a rental property, the great thing is that there are tons of options available.
You can also make your life a lot easier if you work with a property management Boca Raton company for help.
Know the Returns of Your Rental Property
ROI (Return on Investment) is a financial metric that real estate investors utilize to help figure out how profitable a rental property might be.
Fortunately, there are tons of excellent tools online that can help you calculate the possible ROI of any single-family rental home in the United States.
These tools will ask you to enter the address of your rental property. Then, it will provide you with an estimate of possible ROI, even if the house has never been utilized as a rental before.
Monitor Expenses and Income
Monitoring rental property expenses and income can become extremely overwhelming, even for professional real estate investors.
There are tons of common expenses that influence the ROI of a rental property. This includes:
- Depreciation expense
- HOA fees
- Property taxes
- Mortgage payments
- Pest control
- Maintenance and repairs
- Property management fee
- Leasing fees
Though it is possible to monitor expenses and income using a series of spreadsheets, cocktail napkins, or post-it notes, it’s ideal to choose software specifically made for rental property owners.
However, you should know that this type of software isn’t free. Most of them often have a monthly fee. Thus, you should consider this as well.
Now that you know how to purchase a rental property. The next thing you need to know is how to manage it. This is very important if you plan to self-manage your rental property.
Maintain Your Property
Just because you’ve already found a tenant does not mean your job ends there. The truth is that your responsibilities are just getting started. Repair and maintenance will happen.
If you address these issues as soon as possible, you can make your tenant more satisfied. This will improve the possibility of the tenant renewing the lease.
You can also drive by your property now and then to examine exterior damage. Simply ensure you’re not disturbing the tenant when doing this.
You can catch minor issues before they become major ones by performing routine inspections of the exterior and interior of the property.
However, before you conduct any type of inspection, make sure you give the tenant notice weeks or months before.
Market Your Rental Property
If you’re having a hard time finding a potential tenant for your rental property, perhaps you are not marketing it properly.
A lot of property managers and rental property owners utilize tenant screening services and online rental listings to look for qualified tenants.
There are tons of websites out there that allow landlords to:
- Create and sign a personalized lease for the state the rental property is situated in
- Request eviction reports, criminal background, and credit while charging the applicant for the service
- Offer online tenant screening services and applications
- Send leads from potential tenants directly to the landlord
- Automatically organize listings to the top online rental listing services
- Create a rental listing
Once you’ve found the right tenant and they signed the lease, the next thing you need to do is to collect the initial rent and security deposit.
Then, you need to meet the tenant at the property to finish the process.
Figure Out the Fair Market Rent
Setting the correct rent for your property may appear like a combination of science and art. If you set your rent too high, you’ll only deter qualified tenants.
On the other hand, if you set your rent too low, you will greatly lower your possible returns.
That is why there are several factors you need to think about when setting rent. These factors include:
- Property amenities justifying a higher rent such as a community swimming pool or a huge garage
- Median rent that the competition is charging
- Potential tenant demographics such as families or singles
- Median household and per capita income for the area
Hire a Full-Time Property Manager
Though you’ll have better returns if you choose to self-manage your rental property, it is often difficult and overwhelming.
That is why a lot of landlords choose to hire a property manager to help manage their rental property.
A property manager will help take care of all the details. This includes legal issues, repairs and maintenance, and tenant communication.
The idea of managing a rental property can seem to be overwhelming. Unfortunately, it is the reality.
Fortunately, you can make your life as a landlord a lot easier with the help of a rental property manager.