Commercial property and rental property have the potential to deliver significant rental income and returns for investors well into the foreseeable future. However, investing in any property as a rental or as a possible flip can be a risky business. If you decide to make an investment in any type of property, you need to be smart and have a plan before you go in. Making a real estate investment can be a good idea as long as you can get the most out of your investment.
Once you make the decision to invest in either commercial property or rental property, the biggest thing that you will need to figure out is how to get the biggest return from your investment. Owning an investment property can come with plenty of rewards, but there’s no denying there’s also hard work involved.
There are numerous ways to maximize your profits from a rental property. No matter if you are a first-time investor or an experienced commercial real estate expert, getting the most out of your investment begins before you even put in a down payment. Let’s look at some tips for maximizing your rental income and returns.
1. Do thorough market research up front.
One of the cardinal rules for any successful investor is to understand the local market before investing in a property. It’s important you know what you’re getting up front. This means that you should visit the neighborhood, have a property report generated, and look into government data like census information and home price appreciation. This will give you a good idea of what you are getting and the amount of time it may take to resale or rent.
If you are purchasing an income property for rental potential, you may need to consider other factors like the population growth trend in the area and local unemployment rates. It might also be a good idea to speak to a local real estate agent for more specific information.
If you are investing in syndication, you should ask a lot of questions before making the decision. You’ll want to understand everything about the neighborhood and the area to get a clear picture of what you can expect. It is best to understand both long-term and short-term trends to gauge how successful your property might be.
Doing your homework before you make a financial commitment to any investment property will ensure that you know what you are getting. This will allow you to establish expectations and understand the growth potential to get the most out of your property.
2. Take a proactive approach.
Once you have taken out the investment loan and secured your income property, making your monthly mortgage payment will depend on how well your property performs. You need to take a proactive approach toward managing the building. Your proactive approach will ensure that your tenants will be happier, reduce vacancies and lost rents, and save you maintenance costs in the long run.
One of the best ways to be proactive is to mitigate future maintenance needs. For example, you might install high-traffic flooring materials and paints that could cost more up front but will prove to be more durable over time. You’ll usually get your money back and more when it comes to certain maintenance costs.
You might also consider investing in smart technology around the property. Tools like smart thermostats can help keep energy costs down for both owners and tenants. Keyless locks can curb re-key and replacement costs and improve safety and transparency for residents.
As a property owner, the best way to get the most out of your investment is to keep your tenants happy and reduce costly maintenance issues. By taking a proactive approach to property management, you can ensure that your income property produces the best results.
3. Determine how much you want to take on.
Create a smart investment plan and determine how much you can take on. The number of properties you add and investments you make will depend on your lender, investment loans, interest rate, and budget. Outside of this, however, your time and availability will also be determining factors. You need to determine how much you can take on in order to get the most out of your investment properties and not spread yourself thin.
As a smaller investor, you may be able to manage your properties and handle things yourself. If it turns out that you don’t want to take all of this on or have too many properties to handle, you may consider a property manager. A manager can handle the local needs of your residential property and ensure that you are getting the most out of the building. If you’re uncertain about hiring a property manager, you might consult industry associations to find real estate agents in your area who are also property managers.
A real estate agent manager will likely understand local trends and have an interest in managing the property. While a property manager might cost some up front, like making upgrades, it will pay off in the long run. Determining how much you can take on and allowing a property manager to step in if needed will allow you to grow your business.
Getting involved with investment property is not a short-term situation. Investing in rental property is a long-term commitment that requires time, work, and diligence to pay off. Doing market research, taking a proactive approach with your property, and determining what you can handle will help you get the most out of your investment property.
About the Author:
Annie Dickerson and her partner Julie Lam are founders of Goodegg Investments — an award-winning real estate private equity firm — and creators of the Real Estate Accelerator Mentorship Program. They are authors of the book Investing For Good and hosts of the popular Life & Money Show podcast: good egg investments
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.