The decisions people make with regard to residential rental property investments can be surprising. While the goal is always to make money, the approaches are varied and sometimes even counterproductive.
What makes rental property ventures successful long-term? What do smart investors do differently to make these enterprises consistently lucrative? In searching online, one is challenged to find a concise, comprehensive overview of answers to these questions.
With twelve years experience in residential property investing and management, it is clear to this writer that there are certain attributes and practices which characterize successful investors. After years of close observation, the following insights are offered for your consideration and reference.
7 Key Attributes of the Smart Residential Property Investor
• Sets clear and achievable short and long-term revenue goals, with realistic timeframes.
• Has a firm grasp on the financial requirements.
• Thoroughly researches property candidates.
• Buys rental property with prime location, sound structure, minimal repair requirements, at best price.
• Calculates property appeal for rent-rate ratio (i.e., poor appeal equates to lower rent rate, higher tenant turnover; high appeal equates to higher rent rate, lower tenant turnover).
• Understands curb appeal has a direct correlation to renting units faster.
• Knows that proper and timely repairs and maintenance help preserve equity.
The wise investor also appreciates how scaled renovating/remodeling can increase equity and maintain a top-quality tenant base. For those with a plan to sell the property within a predetermined timeframe, such improvements prepare the property for that eventuality while reducing impact to cash flow and minimizing cost spikes. They also know that potential buyers will be evaluating not only the innate property value, but also the renter history (i.e., rent and turnover rates, repair/maintenance records).
4 Key Reasons to Update/Remodel Rental Units
• Maintain, better yet increase equity.
• Attract better-qualified tenants; garner higher rent rates.
• Amortize costs in preparation to sell.
• Earn tax advantages.
3 Key Renovating/Remodeling Considerations
• Do not under or over remodel/renovate.
• Remodel costs will generally need to be depreciated rather than deducted.
• Time improvements for when unit is vacant and ideally off-season.
6 Highest ROI/Most Cost Effective Property Improvements
• Thorough cleaning
• Paint, exterior and interior
• Carpeting, flooring
• Kitchen and bathroom: Resurfacing versus replacing
• New windows and/or doors
• Curb appeal
The savviest of investors are those who take the time to conduct careful research, analyze and regularly review financial data, make calculated property purchases, maintain and periodically upgrade property for optimal equity, and properly manage renter relations.