Here are six essential tips to help ensure that you realize the largest possible profit from your investment property:
1. Don’t over-improve the property
Consider the price range you’re in and what features and amenities will be expected. If rent is cheap, tenants won’t be expecting granite countertops and marble floors in the bathroom. However, any improvements you do make should be built to last, which will reduce repair and renovation costs in the future.
2. Think long-term
You may not see a profit for a while, especially if you’re starting from scratch. You need time to make any necessary repairs, secure steady renters in all units, etc… Your goal is to have the property support itself, and it will over time as the debt goes down and your cash flow goes up.
3. Use your imagination
Not every property is great as-is. Look beyond the current situation to see how it could be transformed with a little elbow grease and updating. If this isn’t your thing, bring someone along who can see past its current state to all that it could be. Try to focus on those improvements that can translate directly to higher rents.
4. Don’t become a DIYer now
You really should hire professionals to do any necessary work, especially if it’s plumbing or electrical work. Do it right the first time to save time, money and headaches (and the risk of any angry tenant.) The idea is to create an ongoing relationship with professionals that can help you maintain your property should you decide to expand your real estate holdings.
5. Screen your tenants
Bad tenants can be a huge nightmare and sometimes you just can’t predict who will fall into that category. At the very least, be sure to run a credit check on each potential tenant and, if possible, talk to their old landlord. If you don’t want to take on this responsibility yourself, you can hire a management company to handle it for you. (Just remember to factor this cost into your list of expenses.)
6. Hire a lawyer and an accountant
This isn’t required, but it’s a very good idea. Choose them carefully (ask for recommendations from friends or your broker) because they will be a part of your investment property team for a long time.
Owning investment property can be very lucrative if done correctly. Just know that while it probably won’t make you a millionaire overnight, the rewards can be great over time. Remember, a conservative approach is probably your best bet. Do your homework, be patient and plan carefully and you’re much more likely to enjoy being a landlord.
Want to learn more about this topic? The Top 5 Questions Investment Property Buyers Ask the Pros. Check it out!