Making Money In Real Estate: 4 Ways To Keep Your Profits Up
Investing in real estate is rapidly becoming a lucrative investment option. More American households are renting since 1965, according to the Census housing data. As of 2016, 36.6 percent of households were renters, and two-thirds of young Americans were also renting their home. Being a landlord can be a viable way to earn an income, supplement one you currently have or as a part of your retirement plans. As an investment opportunity, buy-to-let can net great returns if handled correctly. Thanks to rising rent rates (especially in metropolitan areas), you could be making a healthy profit from your property. Take a look at a few ways to ensure you keep a healthy bottom line going in your venture as a landlord.
Keep Your Costs Down
As a landlord, you should aim to keep your costs down. This is your first step in making a decent profit at the end of the month. Owning rental property comes with a host of running costs in addition to the financing fees. You will have maintenance fees, warranty, property insurance premiums and fees for a real estate agent or advertising to get tenants in. When it comes to your property insurance, comparison is key. Landlord insurance can cost 20-30 percent more than homeowner insurance. Therefore, this is a great area to save on operating costs. There are many insurance firms out there that can all offer a range of quotes.
For repairs and maintenance, getting some jobs done yourself can save you hundreds of dollars in contractor fees. Spending a few hours shopping around for materials can also net you a better raw materials price. However, when outfitting your rental unit, look to maximize appeal by considering all potential tenants. Accessibility features in rental properties widen the rental pool to include seniors and those living with disabilities. Budget-friendly and simple interior decorating ideas can help you get your property looking welcoming but cut out unnecessary spending. With a rising number of senior renters, this is quickly becoming a key market for landlords.
Scope Out Your Market
The location of your investment property heavily influences your profitability. As a rule of thumb, look for locations with amenities or development proposals in place. Transport links, restaurants, supermarkets and schools are great examples. Proximity to these automatically drives your rental price upwards. However, be cautious when choosing a popular location. Heavily populated locations are more likely to carry over-inflated prices. You will want to choose an area where there is a good demand for rentals. The residents’ affordability will tell you the kind of housing they can pay for, whether it is apartments or single family homes. Take the time to research future prospects of rental locations and markets before buying.
Re-evaluate Your Security Deposit
Security deposits are there to protect your investment. When tenants move out, they can leave behind a trail of repairs, and each one of them comes with a cost. Including a security deposit not only helps to deter the impulse to damage the property, but also covers these expenses. Without it, the costs cut into your profit and if your profit margin is small, it may even leave you paying out of pocket.
Minimize Your Vacancy Rates – Plan Ahead
Vacant apartments cost you money. The longer they stay vacant, the more revenue you are losing. Each month an apartment remains empty, the landlord loses a month of income, and by extension, one-twelfth of their annual profit. Regardless of occupancy, certain operating costs for the building will still accrue. Therefore, aim for long term occupancy or reliable tenants. Good tenants mean payments on time and fewer repair costs. When you do have a tenant who is leaving, make use of the notice period to advertise the unit and see potential clients. This way, the gap between the old tenants leaving and new occupiers moving in is kept to a minimum.
Like any other investment, many people invest in real estate with the aim of gaining a worthwhile profit. To do this, it requires more than simply choosing the option with the best cash flow. Focus on these areas, and you should be able to maximize your returns in your real estate future.