When it comes to investing in rental properties, there are a number of important considerations to make before signing. The goal of realty investment is to put your money to work today to increase profits for tomorrow. This return on your property investment must be enough to cover costs and risks. These include taxes and costs associated with owning real estate as well as utilities, insurance and maintenance. Investing in rental properties is relatively simple when you understand basic factors like investment, economics and risk. However, it’s important to know simple doesn’t mean easy. Making a mistake can yield consequences ranging from minor to disastrous. You can easily find yourself broke or bankrupt. Let’s look at the top tips for investing in rental properties in Tampa Bay.
Top Tips for Rental Property Investment
Location : For long-term equity growth, choosing a residential real property in a good location is important. This hardly ever means investing in the prime locations… read, expensive! Search properties with good proximity to major roads, public transport and most importantly, quality schools. Get a feel for what renters in your target rental demographic are looking for. Research rents in the area you want to invest within, both for “as-is” properties and those with repairs or improvements. Most often, up and coming areas offer investors the best return. Be aware of current housing market trends and what will be in future high demand.
Start Small : Beginning with affordable investments, like a single unit or duplex, is key. An apartment building may look like a good initial investment, but if things go south, it can be difficult to pay a hefty mortgage and continued maintenance. Starting small minimizes your risks. Rental purchases should have both a positive cash flow and rate of return. This should be anywhere between 8 and 15% on residential properties. Calculate your prospective return without underestimating repair and maintenance costs or unpaid rent/vacancies. Give yourself plenty of financial cushion.
Over-Improving Properties : Good rental investments keep cash flow at optimal levels. Spending too much on upgrades for a property may seem like a good initial investment, but you will likely spend money on repairs, maintenance and turnovers in the long-term anyway. Keep a set of minimum standards per unit and don’t improve outside of those standards for optimal cash flow and return. Current advice suggest keeping monthly rent at a ratio of about 1.2 to 1.4 times the monthly property costs.
Consider a Property-Management Company : Choosing good tenants to rent your property is critical to a positive return on your rental investment. However, most first-time or entry investors have little experience with screening tenants, nor do they have the resources to do so. A property management company can save time, stress and money in the long run by minimizing vacancies, tenant turnover and property damage from poor tenants. If you are interested in learning more about rental properties in Tampa Bay and how to manage them, contact Tampa Bay Realty and Investment Group today.