This is a guest post by Financial Wolves, a blog about making money with side hustles to help you achieve financial freedom.
Rental property businesses are like a marriage. You want to be sure you’re making the right decision because it can affect your life and your money forever.
Plus, both are a great retirement plan to fall back on.
If you are looking to get started with rental properties, be ready to walk a tightrope.
You must craft a sound and bullet-proof plan to maximize your success rate. It won’t be easy, and you will have to put in a lot of work, but a good investment property business plan is a great long-term investment.
To start a rental property business, you must first understand the ins and outs of what you need to do, and what’s at stake.
Here’s a complete guide on how you can get started with rental properties.
How To Get Started With Rental Properties
Investment Property Management
The rental property market is constantly in flux, changing to suit the world’s needs. Property managers are earning a fair amount of rental assets. Successful rental tenants make successful rental properties.
Every aspect of the property counts and includes:
- Lease contract
The duties and responsibilities attached to rental property management involve all aspects of day-to-day operations of the property, including accounting, tenant relations, maintenance, and repair.
There are a few ways you can execute a business plan.
You, as an investor, will first purchase and then manage properties that can have multiple units for lease.
The monthly rental fees will be the income you’ll produce. So, based on the property, you can assign a suitable rent.
If you don’t want to get caught up in the logistics of directly managing the properties and are willing to spend a little extra, hire property management companies.
They will carry out the duties of a landlord that include rent collection, maintenance, or any other issue that may arise.
Know Rental Property Basics
It is important you do your research before venturing into the world of rental real estate. You don’t want to make a rookie mistake and end up going in a loss.
Getting started with rental properties may seem like a daunting task.
Here are a few things you should keep in mind when doing your homework:
#1. What is the market like?
#2. What are the risks?
#3. How high or low is the rental potential?
#4. What is my competition?
#5. Am I self-funding my business or looking for funds?
The thing that will set you apart as a well-established and qualified business person is your knowledge.
Identify all the key elements that will help you establish a strong foundation. This will also make it easier to loop another party into your business.
It also helps to know the rental business lingo.
Like any business, the rental property industry also has its own language and terms.
For a thorough understanding of buzzwords and jargon that will get you brownie points in the business, go that extra mile and research top real estate terminology, so you can speak the right language for a rental property.
Pro tip: Always use financial analysis to find quantified answers to your investments. Use this free investment property spreadsheet to analyze and value rental properties.
Partner With A Professional
Researching is great and very useful, but for a long-standing market like rental properties, it’s always advisable to seek help from property managers that will give you unparalleled professional advice.
Having been in the business for a while, they will give you all the ground-level understanding of what you need to do to succeed.
The services of a third-party professional will massively upgrade your status as a rental business.
They will use their expertise to help you build a dynamic portfolio, will guide you on how to maintain your property and what you need to do to be a successful landlord.
If you don’t want to put in the dirty work of collecting rent, keeping up the maintenance, or finding tenants, property managers offer to do all that and more as well.
Utilize the resources at your disposal and invest in a reliable property manager.
They will also advise you on the best kind of property to buy and which niche will generate the most profit and is a good fit for you.
You can count on them to guide you on the taxes involved as well.
Choose Your Niche And Market Wisely
Choosing the right market, audience, and of course, location is possibly the most important step if you’re just getting started with investment properties.
This will determine how much revenue you will make and how sustainable your business will be.
The most important element of any rental property business is choosing the right location. This will dictate the kind of customers and offers you get.
Figure out some of the key features that will maximize the demand, price, and long-term potential of the properties.
If you’re looking for a few pointers on how to go about the process, this can serve as a preliminary guide for investing in rental properties for beginners:
- You don’t have to be living in the area you want to buy properties in.
- That being said, you must definitely do a thorough research of the local area and its infrastructure you choose as your market.
- Know the people, know the renters. If you know what they’re looking for, you can easily cater to their demands.
Picking a niche can be stressful, but it’s highly important.
Getting started with rental properties without a focused approach on the type of housing you want to invest in is a dangerous game.
Narrow your scope, and based on the location you choose, figure out what kind of properties sell best.
Are you near a university or college area? Investing in college housing or apartment complexes might be a good idea.
Is it a predominantly residential area? Revamp old or battered properties to suit the aesthetics of today and make it kid-friendly.
These are just a few examples to get you thinking.
Set Up A System
Once you’ve chosen your niche, your property managers should work out a system that will make the process easier for potential applicants.
Creating a system will help all rental processes to run efficiently.
Whether to run a background or credit check, manage the available and rented properties, or systematize all other logistical features, a flawless system is the most effective way to ensure that your business runs smoothly.
There are entire businesses that function exclusively on flipping houses and making thousands just by re-doing old or worn houses to today’s standards.
Don’t shy away from working with old properties, sometimes they can be the best investments. It’s all about knowing your market.
How Are You Financing Your Investment Properties?
Unless you have a lot of money at your disposal, you’re going to need investors and financiers for your business.
If you have an air-tight business plan with a thorough strategy and comprehensive market research, finding investors won’t be difficult.
Private lenders are always on the hunt for the next best opportunity, so your pitch should be the winning score.
Rental property businesses are almost always a sure and stable bet, so financiers are more than willing to put their money in real estate.
Today’s businesses have a lot more options and access to funding sources than before, so you don’t even have to rely on banks for loans.
Look for private money lenders and hard money lenders. It’s easier, efficient, and both parties are almost always willing to work together.
In other words, you don’t have to rely on institutionalized money lending.
But be warned, the interest payments are a little higher for a private lender.
However, for a higher rate, you get double the service in half the time.
It shouldn’t take private lenders more than a few days or even hours if you’re lucky, to process the payments. No need to go through the arduous process of asking a bank for a loan.
Finally, don’t go to your potential investors without a plan first.
They should know exactly the kind of properties they’d be investing in. And it will save you the heartbreak that comes with rejection.
Market Your Business
In a world where the internet has taken over all forms of marketing tactics, it’s easy to bring your business into the limelight.
But don’t be fooled, marketing effectively is one of the most important factors of a good business.
If you choose to hire a property manager, they will go through the ordeal of finding tenants for you.
But if you don’t, you’ll be using different social media and digital platforms to find suitable tenants.
Building a website should be first on your list.
Make sure you upload enough pictures that potential tenants are left wanting to see more. Your titles and descriptions should be catchy, witty, concise, but also informative.
Providing video tours of the property is another great idea. Not many rental businesses do this, so you are sure to stand out.
Other than popular social media platforms, use property listing syndication.
You want your business to gain as much exposure as it can muster.
Knowing how to get started with rental properties is only the beginning.
You’ll need proper professional guidance, research, and understanding of the risks and demands involved, and much more.
But if you’re dedicated and committed to your business plan, there’s nothing that can stop you.
Author Bio: Financial Wolves is a blog focused on helping you make more money to achieve financial freedom. After repaying student loans, I’ve shifted my focus to make more money from side hustles, real estate, freelancing and the online economy. Follow us on Pinterest, YouTube, Twitter and Facebook.