Pros and Cons of Being a Landlord

Landlord

LandlordRentals are the most common way to get started in real estate investing. Renting an investment property will generate passive income over a long period of time and provide the means for you to reinvest into additional real estate purchases and expand your portfolio. But as with any venture, there are a number of pros and cons you should consider before you purchase a rental home. Here’s what you need to know about being a landlord.

PROS

Income

The ability to earn passive income is what draws many investors to rental properties. Be sure the rent you charge is enough to cover expenses, such as mortgage payments and maintenance costs, while ideally making a profit.

Tax Advantages

Landlords may benefit from a slew of tax deductions available for investment properties, including business deductions, the cost of property, depreciation, and mortgage interest.

Equity

When you hold on to a value-increasing property, you are building equity and creating financial security. Not only do you benefit from the income produced from rent but also from the future appreciation of the property. A double blessing!

CONS

Time-Consuming

Though rentals are great sources of passive income, they demand a lot of attention and involve multiple steps that are anything but passive. Some of your workload will include marketing your property, screening applicants, communicating with tenants, coordinating repairs and maintenance work, collecting rent, and filing eviction when needed.

If you own more than one property, consider hiring a property management company to handle the day-to-day operations of your rental homes as tasks will inevitably pile up.

Liability

Just as the tenant must take good care of the property, the landlord has also a set of obligations toward tenants, such as providing a safe and habitable living space. This means adhering to all building codes, performing necessary repairs, maintaining common areas, and keep utilities in working order.

If you fail to comply, a tenant can take legal action against you. Make sure you know what your obligations are regarding both the law and the lease agreement.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

Converting Your Property to a Short-Term Rental

Beach rental

Beach rentalWhether you have a mountain cabin, a beach house, or a downtown condo, renting out a second home is an excellent way to generate passive income. One of the greatest advantages to short-term rentals is the flexibility it allows. Owners can block off calendar periods that they want to keep free for personal use and set fluctuating rates based on the season to maximize profits.

Before you dive right into it, it’s important to know a few things.

Check Regulations

The first thing you should do before you get your property ready for short-term rental is to check any rules and regulations in your area. Depending on where your property is located, you may need to apply for a license and observe certain limitations. In addition, make sure to check whether any HOA restrictions exist on rental properties.

Set a Budget

Because of the high turnover, vacation rentals require a great deal of maintenance and upgrades. If your home is not outfitted for short-term rentals, you will need to take the time to make the appropriate changes and set a budget for any needed renovations.

Remember to account for every expense you incur on the property, including utilities, cleaning costs, consumables (toiletries and toilet tissues), repairs, furnishings, entertainment package (cable and Wi-Fi), and advertising plans.

Prep the Space

Walk around the space and take note of anything you anticipate your guests might need as well as potential issues they might encounter. Some basic utilities for a comfortable stay include electricity, water, heating, air conditioning, plumbing, and Wi-Fi.

A few other things to consider are storage space, kitchenware, appliances, cleaning supplies, toiletries, paper tissues, bedding, trash bags, place settings, coat hangers, and more. A good idea is to make an inventory checklist. You may also want to keep some essential items in plain sight.

Determine the Rent

Your asking price will ultimately come down to factors such as your property’s current market value and location. Most property owners will charge anything from 0.8 to 1.1 percent of their house’s market value for each month. Make sure to check rental prices of comparable homes nearby and factor in any service fees charged by platforms such as Airbnb and VRBO when applicable.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

What to Know When Choosing a Property Management Company

Property Management

Property ManagementProperty management companies are a necessity for many real estate investors with larger portfolios and out-of-state properties. These companies help take some of the workload off investors’ shoulders and free up the time for investors to focus on growing their businesses rather than dealing with the hassle of being a landlord.

Property managers will typically be in charge of all tenant-landlord interactions and day-to-day operations. Some of the services property managers provide may include marketing your rentals, conducting background checks on tenants, collecting rent, handling maintenance and repairs, addressing tenant complaints, and pursuing evictions.

Hiring a property management company has many advantages, so it is important to choose a reputable, experienced company. Following are some considerations to bear in mind when selecting the right property manager for your properties.

Accreditation

Many real estate professionals, including property managers, are accredited by professional bodies and government agencies. Make sure to look up the credentials of staff members and owners. Professionals within the real estate industry are more likely to know the ins and outs of the rental process and provide insights on potential repairs and improvements to ensure the property is up to snuff.

Online Presence

A good reputation online and within their offered references is key, so a good place to start your research is through the internet. Search for property managers from the area where your property is located and check out their ratings and reviews online.

Accountability

An accountable property manager is one that is responsive and organized. As part of their duties, property managers are expected to furnish landlords with regular reporting, including tenancy reports, financial reports, and other ad-hoc reports.

A tenancy report should contain timely updates on occupancy, turnover rate, and pending notices. A financial report, in turn, should detail expenses and revenue, including rent collected, agency fees as well other service fees. In addition, managers should be able to address in writing any requests for information on an ad-hoc basis.

Services Provided

A company that offers a wide range of services related to your business should be at the forefront of your list. After all, the reason to contract out the management services is to give you peace of mind.

Make sure the companies you are researching provide the following services at a minimum:

  • Property Maintenance and Repairs: property managers must have an extensive network of reputable contractors to conduct repairs, improvements, and maintenance work needed to retain tenants.
  • Funds Management: rent collection, banking, and remission should be part of the agreement.
  • Marketing Services: Ask to see a vacancy posting as well as any brochures and marketing material. Things to consider are a strong social media/online presence, professional photography, and compliant language in the advertisements.
  • Tenancy Screening: Ask how the company runs background checks, verify payments, and stay in compliance with existing regulations in order to secure high-quality tenants.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

Making Your Investment Home Disaster-Proof

Disaster proof shutters

Disaster proof shuttersSuccessful real estate investors know the importance of staying on top of landlord-tenant law. Just as you may have some expectations from your tenants, such as paying the rent on time, tenants expect landlords to meet certain conditions before and during the tenancy.

Providing a safe and well-maintained property is a requirement you will find in a standard lease and rental agreement. If your investment home is located in a hazard-prone area, it means preparing it for natural disasters ahead of time. That said, protecting your investment property from the elements doesn’t have to be a pain. Following are some tips to help property owners keep their houses safe.

  1. Speak to Your Insurance Agent

Whether it is floodwaters, hurricane-force winds, or hail, investors should be mindful of potential disasters that may affect the area so they can secure the right insurance policy. For example, flood insurance is a separate policy from homeowners’ insurance that doesn’t typically cover damage or destruction by floods.

Flood insurance is available through the federal National Flood Insurance Program (NFIP) for homeowners in high-risk areas and other participating communities.

  1. Invest in Disaster-Proof Materials

Some cities and counties are more vulnerable than others to high winds from storms, tornadoes, and hurricanes. If your investment home is in area where bad weather is common, you may want to implement wind-resistant features, such as hurricanes shutters, storm windows with double panes and airtight seals, and even impact-resistant shingles.

Other important additions include fortified garage doors or clips and straps to secure your roof. For earthquake-prone areas, consider strapping water heaters and large appliances to the walls or bolting them to the floor.

  1. Cut Back the Tree

While most mature trees are appealing to buyers and renters, some may become diseased or severely damaged and pose serious risk to those living in the home. First and foremost, go around your property and identify suspicious-looking trees. Just make sure to check local regulations around removing trees as some ordinances may prohibit tree removal on private property without a permit. If the tree is outside your property, you’ll most likely need to get your town or city involved.

There are a number of tree removal services that can safely trim or cut down decaying trees. Make sure to get a handful of estimates to save money as this can be expensive.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

Attracting High-Quality Tenants to Your Rental Property

Rental PropertyRental properties are a tried-and-true investment strategy that provides passive income while giving you the option to sell when the time is right. Additionally, owning a rental property allows you to diversify your portfolio. That said, any real estate investment comes with risks, and your profitability is contingent on being able to attract and retain high-quality, dependable tenants.

To mitigate vacancy losses, bolster new tenant applications, and keep good tenants, make sure you follow some of these tips:

Pick the Right Neighborhood

Most tenants will look for areas that have low crimes and good schools as well as easy access to shopping, dining, and parks. If your rental property is located in a desired neighborhood, chances are you won’t run short of prospective tenants.

Upgrade the Kitchen

Updating appliances will not only catch the eye of potential tenants, but also increase your investment home’s value when the time comes to sell it. Alternatively, kitchen upgrades that include new cabinets and modern finishes are sometimes all that is needed to impress sellers and regain some of the original investment.

Invest in Curb Appeal

Curb appeal is vital to making a great first impression on prospective tenants. In addition, home landscape upgrades can offer homeowners over 100% returns on their investments when it comes time to sell. A lawn service, fresh mulch, planted flowers, and clean edges will all help to wow tenants.

Add Amenities

Adding in new amenities and conveniences can help close the deal. Consider things that can make the tenant’s life easier, such as including utilities in the cost of rent, providing extra parking or storage spaces, furnishing in-unit washer and dryer, and installing smart home features.

Show It Off

Once you’ve put in the work to spruce up your rental property, you’ll want to market it right. Having quality photos in a home listing is crucial to that listing’s success. When photographing a home for a listing, make the most of what you have by staging, utilizing natural light, and working angles to your advantage. A professional photographer with experience in real estate should be able to produce beautiful imagery that highlights the aesthetic of the house.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

When Is It Best to Sell a Rental Property?

One of the biggest challenges in real estate investing is figuring out how to maximize revenue. While the decision to offload a rental property shouldn’t be taken lightly, in some instances hanging on to a property may not be in your best interest. Here are some signs that you should sell your real estate investment.

Asset Diversification

If your portfolio isn’t diverse enough, it might be a good idea to sell one of your properties to experiment with different investment types. Asset diversification helps to minimize an investor’s overall risk and offset losses in the event that a particular area performs poorly.

Having said that, focusing your investment property strategy on a niche market can bring many benefits.

Appreciation

There’s no doubt that rental properties are great sources of passive income. But if your rental property has significantly appreciated due to improvements or the area’s growth, it is possible that it may have reached peak value. In this case, it might make sense to sell the property while prices are high.

You can then use the money to reinvest in other up-and-coming real estate markets and expand your portfolio further.

Negative Cash Flow

When assessing the value of your portfolio, consider each property individually. There are several metrics available to help you measure the success of your portfolio, including net cash flow. It may be that the cost of taxes, utilities, and insurance have risen while rents stagnated or dropped. Whatever the reason, if your rental property is not providing a positive cash flow, you should seriously consider cutting your losses and selling it off.

Would you like to speak with a member of the RLG team to discuss the value of your current investment property portfolio and determine areas for improvement? Give us a call today! We would love to help you work with the properties you currently have and multiply your investment portfolio.

Features Every Rental Property Should Have

Rental Property

Rental Property

The benefits of investing in real estate include passive income, stable cash flow, tax advantages, and more. If you own a rental property, you’ll want to minimize vacancy losses and attract high-quality tenants. The ideal tenant is one that never fails to pay the rent on time and keeps the property safe and habitable.

To make your rental property stand out and increase your chances of securing reputable tenants, your rental home should include these five features:

Security System

Adding a security system not only provides peace of mind, but it can also make the difference when prospective tenants are weighing their options. Remember that tenants are looking for a safe place to live, first and foremost. Make installing a security system a priority and confirm existing features are up to snuff.

Energy-Efficient Appliances

Energy-efficient systems and appliances are particularly appealing to many renters and buyers who are willing to pay a little bit extra on rent or the sale price if it means that they will save on electricity later on and help the environment by decreasing power plant emissions.

Renovations

Providing regular maintenance ensures that your rental property is safe and has curb appeal, so it continues to provide an income stream throughout its useful life. But renovations are key to keeping up with changing trends and bring many benefits that you may not have thought about, including the possibility to charge higher rent on the property and to deduct the cost of improvements from your rental income to reduce your tax liability.

Storage Room

A home with plenty of storage space is something most tenants look for. While building in new cabinets or closets can be pricey, you could opt to invest in more affordable shelving units for your rental property. Additionally, be sure to add new hangers, rods, hooks, and baskets to allow tenants to store sundries. Outdoor storage buildings such as sheds may also be worth considering so tenants have access to increased storage capacity.

Outdoor Space

As many people have shifted from in-office to remote work due to the pandemic, access to a backyard or a balcony is at a premium. Consider investing in a small patio or deck, outdoor furniture sets or even a fire pit. Done right, these investments can pay off big!

Would you like to speak with a member of the RLG team to discuss the value of your current investment property portfolio and determine areas for improvement? Give us a call today! We would love to help you with the properties you currently have and multiply your investment portfolio.

The Effects of COVID-19 on Single-Family Rentals

House for rent, single-family rentals, investment property

House for rent, single-family rentals, investment propertyThe COVID-19 pandemic has affected most every aspect of our lives. Many Americans have been teleworking and all of us have been advised to keep physical distance from others due to the incredibly transmissible virus. As a result, many folks have been giving second thought to the kind of lifestyle they want. In a switch, Americans are gravitating away from large, densely populated cities in search of more space.

While the apartment rental market has remained active throughout the pandemic, the industry has noted an uptick in renters deciding not to renew their leases in favor of houses and apartments with lower rent. Rental prices in larger, more expensive cities have decreased as renters have moved to the suburbs, which has driven rental prices up there.

We have all watched the news reports of Americans migrating from larger cities like New York, Chicago, and San Francisco to less populated areas. Some report as many as 30% of Americans have begun to consider following this trend. As the pandemic continues, many corporations are rethinking the steep overhead of office space and are getting used to the reality that telecommuting has terrific advantages. This makes it easier for people to work further from city centers and company headquarters. And many renters and other city dwellers are hunting for space and a home where they can be more socially distant. Herein lies great potential for the astute investor.

Single family homes outside of major cities present strong opportunities for investors looking for return on investment. Demand for single family rental properties across the country, especially in the suburbs, is growing sharply. Renters and buyers alike seek privacy and space like never before making single-family homes an incredibly smart investment now. And the demand for single-family homes appears poised to continue growing as folks who held off on purchases during the last eight months return to the market. Erstwhile urban-loving millennials, in particular, might be a smart focus for investors as they may be most likely to seek a rental single-family dwelling.

Call RLG today to continue this discussion and to learn how our financial experts can help grow your business.