There shouldn’t be any doubt that rental properties make one incredibly profitable investment option. Even if we put aside the fact that these assets are tangible and easy to comprehend even for an absolute newcomer, they also feature one distinct benefit – properties are generating passive income. All these things, however, should not be observed as a guarantee but rather a foundation for success.
How successful you are going to be in building long-term wealth out of your investment ultimately depends on your skill and effort. Let us then take a look at some of the proven tips that should make this job considerably easier.
Develop a long-term strategy
Achieving-long term success is impossible without having a long-term strategy. So, put into writing a thorough plan that will outline all future steps like acquiring the property, setting price model expected revenue, upgrade and renovation plans, etc. By doing this, you will never lose sight of the next milestone and always know how fast you are making progress. While you are doing this, make sure you are making projections based on research and split the plan into realistic, manageable chunks.
As it turns out, the more expensive properties are not always producing the strongest profit. On the contrary – they usually feature longer vacancies, and the price of the upfront investment may for a time cripple your personal finances and bring upgrade plans to a halt. What you should prioritize instead, are a good location, sustainability, and similar amenities. Such properties usually have a good upgrade potential (you can increase their market value in the following years) and are far easier to rent.
Choose the type of tenant you want and stick to it
Trying to appeal to all tenants at once is really not that good of an idea. First, your renovation plans will be all over the place and require more money to be pulled-off. Second, you will need to invest more resources into marketing. What you should do instead is choose one group of tenants that are considered to be reliable (e.g. established couples, elderly couples, students, single professionals, etc.) and choose/upgrade property around their needs. A bit of market research should greatly help this cause.
Reach beyond the local market
Choosing the property in your vicinity seems sounds like a very intuitive move – after all, you are already well acquainted with the local market and its ups and downs. However, good investment opportunities are rarely hiding in plain sight, just around the corner. More often than not, finding a truly excellent catch will require that you venture far beyond your surrounding area. In this case, it is highly advised to seek the help of a reliable real estate consulting firm that will help you cover more ground.
Keep up with market trends
As we already mentioned, your investment strategy should contain the part that will outline the future upgrades intended to increase the value of the properties. You have to be aware that this plan is not set in stone and that you will most likely need to adjust your strategy to keep up with contemporary market trends. As for the current state of the market, the features that appear to produce the best ROI are sustainability, open-floor layout, an abundance of storage space, and low maintenance outdoor areas.
Plan for other rental properties
Every property has its ceiling value – a point after which investing in the mentioned property does no longer produces an increase in profit. Since your goal is to continue acquiring long term wealth, you will need, at some point, start making plans for the acquisition of other properties. When it comes to this, pay a lot of attention while calculating taxes, insurance, maintenance funds, and mortgage interest rates, and see how they factor in your personal finances. Rash moves may leave lasting consequences.
Have an exit strategy
Selling the rental property effectively kills its main benefit – passive income. But, that doesn’t mean you have to be stuck with one property forever. At some point, your investment can outlive its purpose and become a dead weight. In such cases, selling the property can provide you with the up-front capital for acquiring other perspective assets. Of course, instances like this are always made easier when they are anticipated. So, start thinking about the scenarios in which you will be willing to sell your property and strategies for making the transition as seamless as possible.
These few tips will help you to turn your rental property from a stable source of revenue to a valuable asset capable of producing long-term wealth. As safe and comprehensive the real estate market may be, the amount of money you are going to earn from it will ultimately depend on your persistence and knowledge. We hope that we helped you, at least for a bit, with the latter mention. The rest is up to you.