We take a look at what you need to know in order to secure a profitable rental property and how to manage an expanding portfolio.
There are over 40 million individual rental units up for grabs, but that’s likely to grow over the coming years. As the population increases and house prices rise, it’s inevitable that more renters will enter the market looking for suitable homes, providing landlords with a golden opportunity. The more properties you own, the more substantial your profits will be.
Unfortunately, though, it’s not always as easy as that. Before you can think about making money, you need to find a property that’ll give you a good yield. To help you get started, we’ve compiled expert tips on how to secure a profitable rental property along with additional advice to manage your expanding portfolio.
Many factors are at play when it comes to property profitability. While growing your portfolio, it’s vital you consider all of them to secure the highest-yielding units for your rental business. Let’s take a look at the most important to get started.
Not every location is a hub for renters. When looking for properties, consider the areas where you’re going to find more people looking to rent - like cities - and prices are known for steadily increasing. Up-and-coming spots are smart to invest in, too, where experts are predicting house and rental prices to soar in the coming years.
Key factors that’ll make your property more desirable in terms of location include a low crime rate in the area, being close to local amenities, and having good transport links. In-demand schools are another popular spot, with families keen to live nearby for easier commutes.
Renters in different neighborhoods will be on the hunt for different things. For example, it’s likely that renters in busy cities - like New York - will be willing to sacrifice space for a prime location with great transport links. In suburban areas close to schools, you’re more likely to rent to a family who will pay for a nice garden and a good-sized living area.
If you’ve got a neighborhood in mind, get to know the local renters. Find out what they prioritize in a home and look for properties that match the most frequent demands.
As with flipping homes, you can increase the profitability of your rental property with renovations. The idea is simple: buy cheap, renovate, and rent for a higher monthly price than you’d previously been able to. Before getting started, though, it’s vital you think through your plan to ensure it’s viable
Look into financing options, such as development finance specifically for home renovations, to ensure you can cover the cost of the work. It’s also important that you consider the ROI of each change you make to ensure you’ll see a profit. To do this, investigate the worth of different renovations in your rental area based on what locals will pay more for (e.g. a new kitchen or a landscaped garden) and see where they overlap with areas that could use an upgrade in your property.
If you’ve got the time and know-how, securing a run-down property at a bargain price before doing it up can be a huge money-maker that’s worth looking into.
Profitability isn’t as simple as what the property costs vs. how much monthly rent you’ll charge. There are other costs you must consider before buying, including:
Understand these costs when you start searching for a property and you’ll have a much better overview of how much money you can make.
While the idea of expanding your property portfolio is appealing, it no doubt comes with drawbacks. To begin with, you’re going to need a lot of money to purchase another property, complete all the legal requirements, and bring the building up to scratch before you rent it out.
You’ll also have to consider fees from:
Before expanding your portfolio, make sure you’re in a strong enough financial position. Remember, you may not break even for decades, so it’s worth being certain that you can afford another property before jumping into it.
Property management can drastically change your portfolio profits. Badly managed properties, for example, may see a high turnover of tenants with periods of no occupancy and mismanagement of rental fees leading to a loss of income.
On the other hand, excellent property management can boost your profits, keeping both you and your tenants happy.
Benefits of quality property management include:
As you expand your portfolio, the right property management tools will make it easier to stay on top of your properties and see the highest yield. It’ll also free up your time to work on other things, whether that be relaxing in the knowledge that you’ve got a thriving property business or continuing to hunt for profitable homes.
At Landlord Studio, we make it easy to manage growing property portfolios. Automate your rentals, track your income, and keep great tenants in your homes for longer with our easy-to-use landlord software. With the chance to claim an extra $500 a year on missed deductibles and reduce your paperwork, it’s not worth missing out on!
Get started with our free version today and see how Landlord Studio can help you.