This second part of “Investing in Rental Property” is a continuation that highlights the remaining key elements that you should carefully consider before investing in rental property. Whether you’re a new or experienced investor, considering these aspects about rental property can improve the odds that your future investments will ultimately turn out to be successful ones.
6.) Operating and Utility Costs – The operating, or carrying costs of a rental property directly affect its cash flow on a “dollar-for-dollar” basis. Simply stated, a cost reduction of one-dollar for an investment property results in an increased cash flow of that same dollar for the property. Since operating costs have a direct influence on a property’s cash flow, it is critical for an investor to verify all such information supplied by a seller before purchasing his or her property. Unethical sellers may understate their property’s actual operating costs in an attempt to inflate its sales price.
If the tenants occupying the property pay their own utility costs, it is wise to get an idea of what those costs are. When these bills are combined with the tenants rent, the result can determine the overall “affordability” of the property that is based on the average incomes of renters in the area. Utility costs that are too high can result in high tenant turnover. This may justify lower rent levels for the property.
7.) Handling Vacancies – A proper plan (or protocol) for filling vacant apartments can really lower vacancy rates for the rental property and improve its cash flow. If the rental property is located on a highly traveled road and gets lots of exposure, then a simple “for rent” sign may be all that’s needed to attract plenty of potential renters. On the other hand, if the property is somewhat secluded, then a plan for media advertising will be needed to announce the vacancy and attract qualified renters.
8.) Distance Factor of the Property – If you’re an “absentee landlord”, the distance of the rental property from your home can become an important factor if you plan on managing the property yourself. If the property is located quite a distance away, it may become a chore in itself just to get to the property to address tenant issues, perform maintenance, etc.
On the other hand, a rental property that is located within a convenient distance from your residence will make it easier and less time consuming for you to get to the property and carry out your on-site tasks. Over time, this can result in better (and more reliable) management and upkeep of the rental property.
9.) Parking / Laundry facilities – Adequate on-site parking facilities can be a significant benefit for tenants occupying the property. The property should have a sufficient number of parking spaces for the tenants in order to provide convenience and safety of their vehicles. If parking is not sufficient, then it’s a sure bet that problems will develop with the tenants over the situation, leading to turnover and lost income.
Another significant benefit for tenants is a rental property that has adequate on-site laundry facilities. Tenants will certainly appreciate the convenience of it versus having to lug their laundry to a laundromat each week. Also, a coin-operated laundry facility can provide an additional source of income for the property owner.
10.) Investment Goals and Planning – The importance of this aspect of rental property investing could rank it at the top of the list. Simply investing in rental property alone is not enough to achieve your full potential as an investor – it only forms part of the process. To realize your full potential as an investor, you must first establish a set of goals you’d like to achieve. Then a realistic investment plan will have to be developed that will allow you to reach those goals. Such a plan can act as your “blueprint” to investment success.
In conclusion, those are the core issues that should be contemplated before investing your hard-earned money in rental property. Taking the time to do so and adopting this “look before you leap” mentality can certainly increase your level of investment success.