Real estate investment, which includes direct rental income, is not a laid-back venture where you hope to put your house up for tenancy and passively collect rent after.
However, direct property rental has its advantages as a long-term investment that promises better returns (ROI) while the income helps to pay down the mortgage.
Benefits include value appreciation as you pay down the mortgage increasing your equity in the property, while the rental income, with the price set above the monthly maintenance expenses, guarantees a positive cash flow.
Here are critical things to consider as you invest in rental property.
Undertake a financial analysis and create a plan
Assessing your financial strength against the proposed investment in property rentals is the first item to consider.
If acquiring the property on a mortgage, consider your ability to pay the lender during unexpected vacancies as lack of foresight could throw your finances into a spin.
Consider access to affordable property financing and set both your short-term and long-term goals with this in mind to avoid disappointments.
You may engage professionals like Evernest, Rhome, Apex Ventures, etc., who are known for managing residential properties in Nashville to create a viable investment plan that matches your needs.
Your real estate investment plan should start with goals that define expectations and the time frame within which to achieve them.
Next, consider your investment strategy vis-à-vis the type of investment property you want to pursue and the real estate market dynamics in play against your overall financial plan.
Location is everything in real estate investment
Location is king in any type of real estate investment and determines the extent of your success or the lack of it.
Before venturing into property acquisition, scout around to assess and identify profitable locations according to current market trends.
Some locations may have great properties but with poor neighborhood reputation that turns away potential quality tenants and depressing rental prices.
The key markers for prime locations are infrastructure expansion, job, and population growth that indicate a vibrant market with high demand for housing.
Towns with big corporations generate a healthy economy that attracts people seeking job opportunities and eventually good living quarters.
Look out for locations with heavy commercial activities likely to spur economic growth and the corresponding surge in population that indicate potential demand for housing.
Finding the perfect property
After assessing your financial ability, creating a viable rental property investment plan, and identifying a prime location, it is time to home into the perfect property.
However, first, you need to decide what type of rental you want to invest in before buying to ensure you achieve your goals.
You could be looking for a single-family or multi-family home for the traditional rental, or you could be considering an investment in Airbnb, in which case a beach house or condo would be perfect.
Whatever your preference, carry out an investment property analysis to be sure you got the right unit for your rental property investment plan.
As much as your budget will determine the type of property you want to buy, try to pick one that promises the highest ROI with sustainability potential in the market.
Always go back to your calculations to ensure you achieve a positive cash flow to stay afloat.
Manage your rental property professionally
To succeed as a rental property investor, you need to address three key aspects of responsibility.
You must be adept at managing tenants, the property, and finances to keep your investment running profitably.
Managing tenants starts with good communication, listening to their complaints, addressing the issues raised promptly, and a follow-up to ensure they are happy with your attention.
You are under a legal obligation to keep your property safe and in a habitable condition at all times during tenancy.
Practice regular maintenance on the property and avoid reactive response in emergencies as this inconvenience your tenants.
Finally, set your rent price right to fit in with your financial plans, enforce timely rent collection, and minimize maintenance costs to sustain a positive cash flow on your investment.
Revamping your investment property for higher value
Upon acquiring the rental property, a selective revamp is essential to maximize its potential.
Addressing outdated fixtures, worn flooring, and lackluster paint are top priorities.
Furthermore, do a thorough inspection of existing furniture and cabinets, such as the kitchen cabinets, and see if they are requiring modernization and fresh aesthetics to breathe new life into the heart of your rental.
Join a real estate network
A first-time property rental investor needs all the support and mentorship to succeed in the real estate business.
Joining a real estate network provides a ready platform for interaction with experienced realtors and an opportunity to learn the ropes firsthand.
Within the network are various professionals that drive the real estate sector and who can assist a beginner in accessing solutions for their first rental venture.
A real estate network usually has mentors, lawyers, accountants, agents, and home inspectors.
All these professionals carry vast experiences in property management that can benefit a budding investor entering the market for the first time, especially in handling tricky issues that involve taxes, inspection, and legal obligations.
Be smart and join a community of similar interests with a better experience to avoid launching your real estate investment blindly.