I’m a Landlord: 6 Tips for Making Money Off Real Estate
Real estate can be a lucrative investment, but being a successful landlord requires more than just owning property. GOBankingRates spoke to several experienced landlords and real estate investors on how to maximize profits and minimize headaches in the rental property business.
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Here’s what they said about making money off real estate.
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Reduce Vacancy Time
Nick Disney of Sell My San Antonio House explained that to be profitable as a landlord, you need to reduce your vacancy time as much as possible.
“A vacant unit will eat into your profits in a hurry,” he warned. “Make sure you communicate with your tenants to find out if they plan to renew or move out at the end of their lease. If they are planning to leave, have your contractors ready to go so that they can fix any repairs and make the unit ready for the new tenants.”
Disney also suggested that landlords “start advertising right away so that you will have new tenants ready to move in as soon as possible. The more you reduce your vacancy time the more you will increase your profits.”
Screen Tenants Properly
According to Disney, you can avoid a lot of the headaches and horror stories as a landlord if you screen your tenants properly.
“You should have each tenant fill out an application and screen the tenants through a third-party service that checks for things such as credit, eviction and criminal history,” he recommended.
“The majority of horror stories that I have heard began by not having a system in place to properly screen your tenants.”
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Buy Low and Focus on Cash Flow
Danny Johnson, founder at Danny Buys Houses, said his preferred strategy with rental real estate is “buying low and making cash flow from day 1.”
Johnson continued, “If you become an expert at finding distressed real estate, you can still buy properties for a fraction of their value. Most of the time you will need to make repairs to the property, but that is a small price to pay for monthly cash flow over a long period of time.”
Add Value to Your Properties
Another thing Johnson stressed was looking into ways to increase the value and profitability of your rentals, which can be things like “updating the property and adding amenities.”
He said, “Here in San Antonio, Texas, adding central air conditioning instantly increases how much you can rent the house for. Making updates like replacing carpet with luxury vinyl also adds value and will attract better tenants that will pay more.”
Johnson highly recommends this change as “[the vinyl] lasts much longer, which also [saves] money!”
Consider House Hacking
As Johnson explained, “House hacking has been popular for a while as a way to have a place to live while renting out another unit.”
In order to make this possible, you first need to purchase a multi-unit building.
“Sometimes it is possible to have a single tenant on one side of duplex pay the mortgage for the entire property,” continued Johnson. “You could eventually rent out your unit as well and move on to another property to do it all over again. This is an awesome way to grow your net worth.”
Prioritize Tenant Satisfaction and Realistic Pricing
Seamus Nally, the CEO of TurboTenant, emphasized the importance of maintaining good relationships with tenants and setting appropriate rent.
Nelly said, “To make money as a landlord, you have to have consistent tenants. That means that simply owning property and charging a high price isn’t going to cut it.”
Echoing a similar point made by Disney earlier, Nelly continued, saying, “You also have to prioritize things like marketing the property well, maintaining good relationships with your tenants (so that they don’t leave and give bad reviews) and charging realistic rent.”
As a final note, Nelly added, “You can’t make money off your properties if nobody wants to live in them.”
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This article originally appeared on GOBankingRates.com: I’m a Landlord: 6 Tips for Making Money Off Real Estate