Anyone on the hunt for passive income should give some serious thought to rental property investments. Although you’ll still have to act as a responsible landlord, the right properties can generate a small fortune each month with very little effort on your part. However, if you’re a first-time investor, it’s important to understand that not all rental property investments are equally profitable. To help ensure that you’re able to get the most for your money when investing in a new property, put the following pointers to good use.
Take Location into Careful Consideration
When it comes to rental property investing, location is king. No matter how nice or well-maintained a property is, you’re unlikely to receive many rental applications if it’s located in an unpopular, unsafe or hopelessly secluded area. So, before committing to investing in a property, take care to research its location in order to ascertain how desirable prospective renters are likely to find it. As you’ll find, a number of rental home communities can be found in popular – and profitable – locations.
Have Every Potential Investment Inspected
Not having a property thoroughly inspected can be a costly mistake. Even if a property appears to be well-maintained and bereft of readily apparent problems, a money pit could be lurking beneath this desirable exterior. With certain investments, time is of the essence. For example, if the property in question is highly sought after, you may find yourself in competition with a number of other investors. Still, purchasing a property without a thorough inspection can lead to massive buyer’s remorse down the line.
To help ensure that you don’t get stuck with a lemon, have any property you’re interested in purchasing meticulously inspected by knowledgeable plumbers, electricians and building inspectors. This may mean waiting on making an offer, but exercising this level of caution stands to save you a fortune in the long run. Although inspections are particularly vital for older properties, they should never be neglected in the case of newer properties, either.
Become Familiar with Fair Housing Laws
Not taking the time to familiarize yourself with fair housing laws can land you on the receiving end of a costly lawsuit. In essence, these laws serve to prevent property owners from discriminating against prospective renters on the basis of race, gender, religion and a variety of other traits. If you don’t brush up on fair housing laws in advance of reviewing rental applications, you may wind up violating them without even realizing it. Not only does this stand to cost you a fair amount of money, but it can also do lasting damage to your professional reputation – which can prove detrimental to future income
Hire a Dependable Maintenance Staff
A lack of dependable maintenance is among the most common complaints renters level against their landlords. As the property owner, the task of fixing a wide variety of issues falls squarely on you and your maintenance team. Since the maintenance crew’s job performance is reflective of your level of dedication, you’d do well to fill these roles with people who are dependable, personable and skilled at their craft. While you’ll occasionally need to enlist the services of outside specialists, the maintenance personnel you select should be able to handle the vast majority of upkeep issues.
Keep Emergency Maintenance Funds on Hand
As any experienced landlord can confirm, large-scale maintenance issues commonly occur with little to no warning. Depending on the severity of the problem, you may need to bring in outside help and shell out the money for major renovations. Needless to say, you’re going to have a hard time doing this in the absence of ample emergency funds. To ensure that you never face a maintenance emergency without sufficient resources on hand, take care to put a small amount of your income into a designated emergency fund each month.
There are copious advantages to investing in rental properties. Since a single high-profile property has the potential to generate a sizable chunk of passive income every month, there’s little wonder as to why rentals are such popular investments. However, this isn’t to say that one rental property is as good as another. As such, when exploring potential investment opportunities, it’s in your best interest to exercise discernment. Investors looking to see the largest possible ROI would do well to heed the tips discussed above.
