The real estate industry is a very profitable business. However, there are certain things that you have to do in order to ensure that you will be successful. There’s a lot of time and research that goes into managing a profitable property. Here are some things that you should and should not do.
Do: Make sure your property is in a good location.
The location of a rental property or properties is one of the biggest indicators of how much of a return you will see on your investment. Whether you’ve invested in a short-term rental property, such as a vacation rental, or a long-term residential property, the location matters. A good location means that it is more likely for you to attract potential renters.
For a vacation rental, this means that your property should be in a prime location for tourists— perhaps near the beach or other nearby attractions. When it comes to a residential property, you will want to make sure that your property is located within a neighborhood that has low crime rates, job growth opportunities, a good school district, and access to leisure activities, such as a park or a movie theater.
Don’t: Put all of your money into a fixer-upper.
Fixer-uppers are very tempting because they don’t cost as much as homes that don’t need any extensive repairs or major renovations. However, the cost of these repairs and renovations may end up costing you more money in the long run. For example, roof repairs/replacements may cost you up to $12,000, while window replacements can cost up to $500 per window. Of course, there is the possibility that you will come into a fixer-upper that only requires minor repairs, which will actually increase the value of the home. Unfortunately, this isn’t always the case, so avoid investing in homes that require a lot of renovations.
Do: Consider small renovations that increase the property value.
While a fixer-upper may end up costing you more money, it is worth it to think about renovations that will increase the value of your property— of course, if it’s within your budget. Several minor renovations, such as a minor kitchen remodel, replacing the garage door, repainting the outside of the home, and installing wood or laminate flooring are common renovations that homeowners make to increase the value of their home. Other value-increasing renovations include:
- A deck addition
- A finished basement
- A steel door entryway
- Fiberglass entry door
- Siding replacement
- Smart home technology
Again, it isn’t necessary to do all of these renovations at one time, unless this is a viable financial option. Just focusing on one of these renovations is enough to increase the value of your property.
Don’t: Skip out on using a lender.
Investing in real estate is similar to running a business— you’re in charge of how much of a profit you will make off of investing in one or more homes. Just like with a business, you are also responsible for finding a way to finance your investment. While some people may have the capital to invest in real estate, others do not. Even if you do have the money to purchase a property yourself, it’s still not a bad idea to seek assistance from a lender because you can actually see a greater return with a lender. Private mortgage lenders can offer you loan programs that more closely suit your needs as a real estate investor.
On top of all of this, it is still important to remember that in order to have repeat renters (for short-term rentals) and to maintain a reputation as a good landlord, you must also be a good property manager and tenant manager. Following these dos and don’ts won’t make much of a difference if you fail to effectively communicate with your tenants and neglect your responsibilities as a landlord.