Starting a rental property business can be a very lucrative endeavor. However, it’s also not the easiest business to get into. For one, acquiring property requires a lot of capital. Getting a bank loan to purchase property may also prove a little tricky especially if you’re just starting out. Moreover, finding trustworthy tenants who will take good care of your unit/s and pay their rent on time is yet another challenging step.
Given all these perplexing concerns, how do you start the journey to becoming a great landlord? Fear not, since others have been in your shoes before. Below, we’ll look at advice from experts in the field on the fundamentals of starting a rental property business – from financing to acquisition, to management.
Leverage Existing Property for Financing
For those who are looking for real estate to invest in, it would be advisable to leverage your existing home first. Small Business suggests two ways of doing this: either through using the equity in your home as down payment for buying a new property, or through renting out your current home while you move into a new one.
However, if you plan on staying in your home but need capital, you can also apply for a home equity loan or an investment property loan. Keep in mind however that if you have zero rental experience, banks may give you unfavorable options on investment loans. Moreover, if you are in the process of growing your rental property business, Fast Small Business Loans from alternative lenders could work for you, especially if you’ve been operating for more than six months and the business is in good standing.
Invest In Condos, Not Co-ops
Once you’ve secured financing, the next step is knowing what type of property to invest in. Understanding your own current business goals will help you in this decision. For example, Yoreevo details how investing in condos instead of co-ops in New York City could be a better way to go if your goal is to actually grow your money. This is due to the restrictions attached to NYC co-ops, which usually come with limitations about how often you can sublet a unit. You’re usually not allowed to sublet a co-op for the first two years of occupancy, and they’ll only allow you to rent it out for two out of five years. Condominiums, on the other hand, are much easier to purchase as well as renovate according to your target market’s wants and needs. Moreover, your buyer pool will expand since foreigners are restricted to renting condominiums.
Find Good Tenants
Military.com shares some tips from real estate experts on the best ways to find the best tenants for your property. Among all the tips, knowing where to advertise is key. Avoid posting on sites like Craigslist since these have been notorious for scammers who change the contact info on rental listings and then take the down payment of potential tenants. For more trustworthy advertising, you can begin by getting referrals from families and friends. Start with broadcasting your ad on your own social networking sites and approaching local businesses in your community. Make use of flyers and newspaper listings.
Get Help in Managing Finances
Once your property leasing business grows and all your properties have tenants, it’s important to manage your finances wisely. The Balance recommends that people who own rental properties should get an accountant, explaining that “owning a rental property is essentially like owning your own business, so hiring an accountant is likely necessary for this situation.” Getting an accountant will not only help you stay on top of your books, they will also give you advice when it comes to paying taxes. This could save you a ton of money that you can eventually use to invest in more property in the future.
