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Real estate is a great investment because it’s inherently valuable, which lets it continue to gain value even in times of economic uncertainty. Long-Term Rental Properties also have the advantage of cash flow in the form of rental payments, which can be used to cover monthly expenses and even generate income. The key to owning profitable rental investments is consistent and careful management over time. Along with taking physical care of the property, you will need to oversee tenant requests and payments, and there are some strategies you can use to handle all these tasks effectively.
1. Screening and Selecting Tenants
The first step to a successful rental property investment is choosing good tenants. This can be done by having a comprehensive screening process and conducting background and credit checks for every applicant. Be on the lookout for a history of eviction or signs of potential fraud. You can also ask for references from past landlords to get an idea of their rental history. Ideally, you should be looking for tenants who will pay rent reliably and also stay at your property for a long time.
2. Setting the Right Rental Price
The price you set your rental units at will be important for a number of reasons. You need to balance making a good return with also being competitive in your local market. You can determine a good price range for your units by taking a look at comparable properties in nearby neighborhoods. From there, you should fine tune your pricing based on market conditions and the level of demand you are seeing. If your rental property offers certain amenities, like a finished outdoor area or exterior deck, it can add value to the home. Even things like parking spaces, hardwood floors, or a decent yard can add value to your listing.
3. Regular Maintenance and Repairs
Another important aspect of managing properties is taking good care of them. This may seem somewhat obvious, but it can be difficult to handle all maintenance and repair requests in a timely manner, especially if you’re the sole owner of a portfolio of real estate properties. Taking good care of your properties (and the tenants inside them) will ensure that they continue to generate reliable income for you each month.
One strategy we recommend is setting up a maintenance schedule where you regularly check in with each of your tenants. It doesn’t have to be in-person, a phone call or text will do the trick, and really only needs to be done on a monthly or quarterly basis. This allows you to stay on top of any repairs before they balloon into bigger issues and has the added benefit of building trust with your tenants.
4. Effective Communication with Tenants
Effective communication helps make managing tenants easy, which becomes important as you scale your rental property investments. Effective communication begins with creating an encompassing lease agreement that covers all aspects of the rental, such as pets, subletting, and other rules you want to establish clearly at the start of the lease. This will help prevent issues from occurring down the line and can also protect you in the case of legal disputes. Along with a complete lease agreement, be sure to talk to your tenants regularly so you can address their concerns and stay on top of maintenance issues.
5. Financial Management and Budgeting
As with any other type of real estate investment, careful planning and budgeting can help increase your return on investment. The more research and due diligence you can commit to the process before making a purchase, the higher the likelihood of your investment being lucrative. Be sure to make a solid business plan and calculate your ROI with each property you invest in. Then, be sure to stay on top of the numbers on a monthly basis to ensure you’re hitting your projections.
6. Legal Compliance and Tax Advantages
The final area we want to discuss covers legal compliance and the tax code, along with how you may be able to maximize your returns through tax deductions. First, ensure that your property is in compliance with all local and state regulations. Your lease agreement should also comply with fair housing laws and the local landlord-tenant laws in your jurisdiction.
When it comes to managing the taxes on your rental properties, you should consider hiring an accountant or tax professional to help you maximize your deductions. Most of the expenses related to managing your rentals can be written off, as well as your loan interest costs. You may also benefit from conducting a cost-segregation study with a larger property to benefit from depreciation over time.
Bonus Tip: Work with RCN Capital
The easiest way to save on a real estate investment is to find a trusted lender that can get you the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors. RCN Capital also has flexible and competitive loan options available. Are you looking to purchase or refinance a rental property for your investment portfolio?Connect with us today.