Rental properties are a great strategy to build wealth. But only if you know how to manage your rental properly. If you don’t, rentals are a surefire way to lose money, gain stress, and make you reconsider ever getting into real estate.
That’s why anyone looking to add rental properties to their investment portfolio--whether it’s your first one or the fifth--should consider these factors to earn more with ease.
Tip #1: Is renting or selling better for you?
Perhaps you’re currently living in the property you want to rent out. Before you invest too much time, energy, and finances into getting your house ready to rent, you may want to re-evaluate what your end goals are for your investment.
Rentals are a great option if you want a long-term investment to add to your portfolio. They also work best if the rental income is at least significantly higher than your mortgage (and don’t forget to factor in house maintenance costs and upkeep). If that’s the case, then renting may be the best route for you.
However, if you’re looking to make immediate money or if you want to take advantage of the skyrocketing housing market prices, then selling may actually be a better option.
Tip #2: To remodel or not to remodel?
Depending on the state of your house, you may or may not need to do some updating before renting out your property.
At a minimum, your house should be structurally sound and functional with working appliances. This may sound like common sense, but it can be confusing for homeowners about how much they need to update their home before renting it out. If you’re mainly adding cosmetic upgrades to the house, then your best bet is to save yourself the expense (and headache) and invest that money elsewhere.
In fact, investing in brand new hardwood floors or high-end lighting fixtures is not recommended. This is because there is a high probability your expensive new additions will get dirtied or damaged with tenants (especially those with families or pets). The bottom line is your house needs to be in good enough shape to attract quality tenants, but not overly nice so that you’re worried about your new upgrades getting damaged.
Tip #3: Who’s in charge?
Once your home is ready to rent out, you need to figure out how to find tenants and how to manage them.
If that doesn’t sound too challenging, consider that’s also including hosting multiple viewings of your property, reviewing applicant screenings, and taking urgent calls when something breaks and needs to be fixed (just to name a few responsibilities of owning and operating your own rental).
While that list of tasks might have you running for the hills, that’s where property management services come in. Many will offer varying amounts of support if you decide you only want them to help you find tenants, or if you desire a full-service package. Regardless of what you decide, property managers can help take the stress out of running your rental.
Owning rental properties can be a great way to begin your real estate investment journey, and with the right knowledge and preparation, can be a foundation piece of your wealth growing strategy. If you are interested in learning more about building your rental property portfolio, contact the Evergreen Housing Network team at (253) 266-3973 to learn more.
Nicole Amdahl is the Project Manager at Evergreen Housing Network, where she manages property renovations for rental or selling on the market. In her free time, she enjoys investing in real estate, writing her debut novel, and traveling as much as her bank account can sustain.