One of the best ways to build long-term wealth is by owning and operating rental properties. Long-term rental properties make for good investments because they not only provides you with steady monthly income, but they can also gain value over time with appreciation. If you already own or plan to add a rental property to your portfolio, you’ll be looking for ways to maximize the return of your investment. There are a several ways you can do this, ranging from how you manage the property to the tax benefits that come with it. Continue reading to learn more about how you can improve your ROI with a long-term rental property.
It starts with a good house
Every successful real estate deal has one thing in common, and that’s a quality property that people will want to live in. If possible, you should look to own properties in good areas that are safe and have access to amenities like shopping and entertainment. This helps increase the demand for your property, which leads to higher rental income and an easier time finding tenants. You’ll also want to make sure your property is in good condition, so you don’t have to overspend on maintenance and repairs. Taking care of minor issues before they become big problems is one thing that can make a huge difference to your bottom line. Consider getting a home inspection to reveal any underlying issues that a property may have, and don’t purchase any property without ordering one.
The key to maximizing the return of your rental properties lies in cash flow. Cash flow can be defined as the net income a property provides after considering all monthly and annual expenses related to it. To boost your cash flow, first you should make sure you’re charging the right amount for rent by looking at comparable rentals. There are a number of other ways to boost a properties income, many of which we’ll cover in this post, but there are also a few ways to reduce expenses. You can invest in energy efficient lighting and insulation and purchase newer high-efficiency appliances to reduce monthly bills. The easiest way to save on a property’s expenses though, is by refinancing at a lower interest rate.
Tenant management and turnover
Missed payments and vacancies are two major factors than can affect your ROI, but you can alleviate some of this risk by selecting good tenants and being a responsible landlord. Tenants screening will be crucial for this – run a credit and background check with each potential tenant to ensure they can reliably pay rent every month. In terms of managing your property, you need to be available to your tenants and quick to respond to any maintenance requests. You should also conduct regular inspections of the property (with the tenant’s consent). If your tenants know they are in good hands, they’ll be more likely stay renting your property for a long time.
The lesser-known benefit of owning rental property is all of the tax advantages that come with it. First, all of the maintenance and repair expenses associated with the property can be deducted, as well as any mortgage interest payments. Another way to save with rental properties is by conducting a cost-segregation study. In a cost-segregation study, you depreciate all of the assets on a property over the useable lifespan of the assets. Furniture, appliances, and improvements can all be included in the study, as well as the building itself. When you consider everything that can be deducted on a property, you see how it can lead to massive tax savings for the owner. Consider working with a tax professional to maximize the savings on your rental property.
Consider renovating the property
If you’ve exhausted all other options, you can always invest in improving the property. There are key renovations you can make which can boost your rental income at minimal cost to you. Some great examples of these include: repainting rooms, updating the kitchen and bathrooms, and taking care of landscaping to boost curb appeal. Along with boosting rent this has the added benefit of increasing your property’s value. Making renovations isn’t exactly cheap however, so you’ll have to measure the cost of every upgrade against the potential added value it brings to see if it’s really worth the investment.
The easiest way to save on a rental property purchase 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 long-term rental property? Connect with us today.