Investing in rental properties is a fantastic way to boost your financial status and enjoy monthly returns. However, it’s important to understand that, as with any type of investment, rental properties require proper planning and management to ensure that your business runs like a well-oiled machine.
Whether you are new to investment properties or have been a real estate investor for years, you can benefit from these five steps to better rental property investment profits!
Step One: Do Your Research
As with anything in life, to be successful, you must ensure that you know what you are doing. You will need to conduct market research to identify potentially lucrative areas such as Windsor, Ontario. Assess the market conditions to determine whether it is a buyers’ or sellers’ market and plan your rental home purchases accordingly to maximize profits.
Before buying a rental property, we highly recommend looking at rental rates in the area to determine whether you will enjoy a positive cash flow, taking into consideration expenditures like property taxes, maintenance costs, and home insurance.
You will also need to think about other factors, such as population trends, the job market, the development of infrastructure, and how the rental market correctly performs in that area. If the area is known for being home to owners rather than tenants, then it may not be such a wise idea to invest in that location.
When choosing residential or commercial real estate, consider factors that will appeal to prospective tenants, such as accessibility to facilities, public transportation options, educational institutions, and more. In addition, consider the home’s overall condition, any renovations or upgrades needed, and overall investment potential.
Step Two: Set Realistic Goals
As the saying goes, if you don’t know where you’re going, any road will take you there. Nothing could be more true for a Windsor property management company or rental business owner. Goal setting allows you to take stock of the present and ensure that you are working toward a successful future.
When it comes to income properties, you should set SMART goals (i.e., goals that are specific, measurable, achievable, relevant, and time-bound). If your goal is to increase your rental income, that’s good, but attaching a deadline to it increases the drive and urgency to achieve that goal.
We recommend setting goals around the following areas for your investment business:
Profits
Determine the cash-on-cash return that you want to achieve for the year. Whether you utilize a particular monetary figure or a percentage increase, it is important to set realistic goals. Failing to do so could result in you losing focus or allowing your business to continue with the same profits rather than growing your income over time. The team at Maximum property solutions can help you with your financial reporting so that your goals stay on track.
Expenses
The truth is that more operating expenses equals lower revenue. Therefore, it’s important to set goals regarding cost management. Conducting preventative maintenance, as mentioned previously, is a great way to reduce expenditure.
However, keep in mind that as your business starts to grow, you will likely have to spend more to manage it efficiently. This could entail providing new amenities for the properties you own or hiring additional property managers to help you administrate the rentals.
This means that the monthly rent that you charge tenants may need to be adjusted to account for these added expenses. Consider how much you spent over the past few years and look for ways to cut down or better control expenses by reducing operations and boosting efficiency.
Step Three: Consider Your Return on Investment (ROI)
The goal of any real estate investment is to make a profit, and to do so; it’s important to crunch the numbers. You need to ensure that your rental business is able to offer positive cash flow.
To maximize your operating income, try to keep expenses as low as possible. This might involve conducting regular preventative maintenance to avoid serious and costly repairs later on.
When considering a new property, be sure to assess the condition of the relevant real estate markets, vacancy rate, average rental income in that location, and more to ensure that you are making a wise investment.
Also, look at whether the property is worth the purchase price. If you notice that there are serious issues that will require significant capital to fix, it may not be worth investing in the home.
You should also look at ways to prevent or reduce rent delinquency. You could try offering tenants more options to pay their monthly rent, such as via a cash payment service. It’s a good idea to consult a reliable financial advisor who can offer tailored advice and keep your rental property profits on track.
Step Four: Use Property Management Software
Suppose you have been tracking KPIs on an Excel spreadsheet. If that’s the case, then it is time to stop. Property management software has been designed to help you keep track of data more efficiently and can really help to improve transparency and reliability.
This software will allow you to view property values, assess rental prices, manage your rental units, receive and track income, calculate operating expenses, screen tenants, and keep a close eye on rental property profits!
Step Five: Manage Tenant Relations Well
Ensuring good tenant relations is the key to a successful rental property business. Be sure to maintain open and transparent communication with tenants and address their concerns promptly to ensure that your rental property does not lie vacant.
Communicate your expectations clearly and ensure that your terms and conditions are well understood. It’s also a good idea to screen tenants properly before allowing them to inhabit a rental home to minimize any issues and ensure a long-term relationship can be maintained.
Looking for a Reliable Team of Property Managers?
If you need help administrating your rental property investment, you can turn to Maximum Property Solutions for professional help. From showing and leasing to preventative maintenance and financial reporting, we are here to help you achieve your goals. Whether you have many rentals in Windsor and Essex County, or just a few, you can count on us to help you every step of the way.
To learn more about our property management services, contact Maximum Property Solutions today and watch your rental property profits grow!