Given how much capital goes into the average rental property, it’s only natural that you’d want your first foray into property ownership to be a rousing success. Unfortunately, a fair number of first-time landlords make an assortment of rookie mistakes that cause them to lose significant sums. Although making your first rental property profitable will involve rolling up your sleeves and putting in some work, it should be well within your abilities – especially if you have the following tips at your disposal.
Look for Properties in Popular Areas
In many respects, location is the most important factor to consider when looking at prospective investment opportunities. After all, no matter how many amenities a property has to offer, it’s unlikely to turn a significant profit in an area with low housing demand. So, regardless of how in love you are with a certain property, take care to research its location before committing to invest.
When researching property locations, there are a number of things you’ll need to take into account. For example, what’s the area’s median income? How high are its crime rates? How much demand is there for housing? How much are similar local properties being rented for? The answers to these questions will provide you with a solid idea of how much rental income you can expect the property to generate, thus helping you determine whether this is truly a worthwhile investment.
If you don’t have any experience researching property locations, consider enlisting the aid of a professional real estate investment company. In addition to walking you through the basics of location research, the right company will be able to educate you on a variety of real estate investment strategies.
Consider the Property’s Curb Appeal
Curb appeal can be just as important to rental property profitability as it is to home sales. No matter how much a property’s interior has to offer, it’s unlikely to generate sufficient interest if the exterior leaves a lot to be desired. With this in mind, you’d do well to step up the curb appeal of any rental property you invest in.
Among other things, this entails repainting the property as needed, staying on top of groundskeeping and attending to any necessary repairs or renovations. As cumbersome as you may find these tasks, making them a top priority stands to generate a healthy level of interest in the property and help ensure that it’s never without tenants.
Take the Time to Screen Rental Applicants
A property’s tenants – or lack thereof – play an integral role in determining its overall profitability. As such, taking on tenants who are unable and/or unwilling to keep up with rent can be extremely detrimental to your financial bottom line. Furthermore, depending on where the property is located, you may find evicting non-paying tenants to be a long and arduous process.
As any experienced landlord will tell you, there’s no catch-all solution for avoiding unreliable tenants. After all, the fact that someone is able to present themselves well during the application process doesn’t automatically mean that they’re going to make a good tenant. Fortunately, you can minimize your chances of taking on bad tenants by regarding applicant screening with due importance.
So, with each applicant’s permission, take care to run a credit check and background check. While past criminal convictions shouldn’t automatically remove an applicant from consideration, you should proceed with caution if they were convicted of crimes that could prove dangerous to other renters or the property itself. You should also confirm that every applicant is able to afford rent by requesting proof of income. For good measure, request that applicants list references – preferably employers and previous landlords – and make a point of following up with them. Some applicants bank on landlords never contacting references – and all too often, they’re right.
Conclusion
Not every rental property investment opportunity that comes your way is going to generate a healthy profit. While a good property can net you a fortune in passive income, an ill-advised investment can leave you financially depleted and deeply regretful. Failing to put sufficient time and resources into maintaining a property and keeping tenants satisfied can also adversely impact the profitability of your first rental property. First-time rental property owners looking to generate the highest possible ROI should take the previously discussed pointers to heart.
