Starting your rental property business is a fantastic way to increase your equity and create a steady source of income with minimal time spent. And if you are interested in real estate investing, opening a rental property is a good start.
However, having a property to rent out does not instantly mean success in the rental property business. Just like with any business, it requires a great deal of research, hard work, and dedication.
If you are thinking of opening your rental property business, you have to understand first the pros and cons of renting and buying. Here are six critical things you must know about.
Putting Yourself On Your Consumers Shoes
Weighing The Scale Between Buying Or Renting
One of the most significant decisions a consumer can make is choosing to stop renting and purchasing your own home. It is a decision between investing in a property or continuing with renting. For some, renting is better and more advantageous than buying a house. However, many will disagree and say that buying a home is better than renting. Both come with their benefits and disadvantages. It all depends on the person’s lifestyle, finances, and work situation.
- Advantages of Buying a House
Owning a house is considered an investment since it is beneficial for you in many different ways. It is also a property that appreciates over time. It has long-term benefits especially when we consider, security, equity, and ownership. You can always seek the assistance of mortgage companies when you are planning to sell it in the future in case your plans will change.
Additionally, when you own a property, you can do whatever you want with it. You can design and improve it the way you want to; you can also choose to make it a money-generating property by leasing it out when you are not planning to live in it.
- Disadvantages of Buying a House
On the other hand, owning a house comes with a lot of responsibilities. You have to make sure that you are ready to make your monthly payments. It could be a hassle especially since home loans often take decades to pay. The average life of this type of loan is around ten to thirty years depending on your financial capacity.
You will also have to spend money on maintenance and repairs especially when it gets worn. In addition to your mortgage loan, you will also have to pay for home insurance and other premiums especially if you opted for a condominium.
- Advantages of Renting
One of the things we can say about renting an apartment is its flexibility. You can always move from one apartment to another whenever you want to or when your contract ends. It allows you to explore many different neighborhoods and experience different areas. Additionally, there is no commitment, so when the budget gets tight, you can always find a more affordable place to rent.
It is also convenient if you get moved from one place to another because of your work, you do not need to worry about making double payments, one on your house and another on your apartment. In short, renting offers financial freedom.
- Disadvantages of Renting
You may have financial freedom when renting, but in the long-run, it may not be advantageous especially when you are planning on having your own family. You will not have a permanent place to settle, and it could be a problem in the future. Additionally, you have no freedom to improve or make changes to it without the consent of the lessor or the owner. Thus, it could be uncomfortable for you too.
Research
Before you put up your custom yard sign on, the first thing to opening up any business is doing your research. Most especially if you are new to the area. Research the basics of real estate investing, investment strategies, types of rental properties, and aspects like laws and regulations that can affect your business.
It is also essential to be specific in the area of research to find out the rental potential of your property against your competition. Search who your potential customers are going to be and how you will be able to cater to them, and the duties you will have as the landlord.
Seek professional help
If you are starting in the rental property business, it is better to seek professional advice. A professional will be able to help you plan your rental property business, decide the funding of your business, and guide you with the nitty-gritty aspects of rental business like taxes.
Professional help can come from mortgage brokers. They can advise on the type of rental property to buy and ways to fund the business.
Prepare a business plan
Even as a way to generate passive income, it is essential to create a business plan for your rental property business. The business plan should include the timeline for the start of the business, your vision and mission for the company, and the financial projections within an estimated time.
The planning should also include the management techniques, rental unit pricing, plans for expansion, and advertising strategy.
Keep track of your cash flow
Your property’s cash flow is the rental income left over after you have paid off all expenses you incurred on the property and in starting the business. It can either be positive or negative. Your goal is to have a positive cash flow, which means your rental property business is profitable. A negative cash flow, on the other hand, would indicate that the property is costing you more money than it is earning.
Market your rental property business
Now that you have your rental property business all set, it is now time to attract customers and start earning. One of the keys to quickly rent out your units is through marketing or advertising. This is where you are ready to place your custom yard sign all over the neighborhood. There are different ways to do this. One is through real estate listing syndication. Real estate listing syndication is where your property ad appears in many places at the same time, with the goal of increasing exposure.
Another sure-fire way to advertise is through social media. Take advantage of the power of social media by uploading quality pictures and video tours of your units on the many rental groups on different social media platforms.
Author Box
Sabahat Akhter is the Project Manager for leading printing companies producing promotional advertising products. She has experience in Data Management and Products Quality Assurance. QA and large scale production workflows are her expertise.
Sabahat Akhter, https://imprint.com
