If you have a primary property and want to buy a second one as your investment property, this can be the first step towards being a real estate investor. You can use this property as a rental property and add some money to your monthly income. However, it is important to convert your property to a rental unit. New investors have no idea about that, and we are here to help you.
What will be the rent of the house?
For the new investors, it is a great challenge to decide the rent of the house. Market analysis can help you to determine the rent of your house. Everyone wants to get maximum return on his investment, and if you want the same, there is nothing strange about it. Few tools are available, which you can use to calculate your unit's rent.
Let's learn about these tools.
Calculate rent: The first thing you can do is calculate the rent based on your expenses. For that, you have to know some fees and prices, for instance.
- The property tax, which you must pay every month.
- Insurance installment, calculate it per month basis, as you charge monthly rent.
- Approximate maintenance fee per month
- The mortgage of the house
- The monthly income you want in your pocket
Calculate all these fees individually and then add them to calculate the rent. Another fee you can add to this amount is the vacancy rate. For instance, if the vacancy rate is 8%, you must multiply the result of all the above calculations by 1.08; the outcome you get will be your rent which you will charge from your tenants.
Rental comparison: This is another tool that can help you decide the amount of rent you should charge. You have to get information about other similar rental units. You can decide your unit's rent by comparing it with those houses. You can compare the houses based on their size, number of bedrooms, and bathrooms. The houses you compare your house to must be in the same area. You can make a list of similar houses get information about their rent, occupancy rate and listing price.
It will give you a clear idea about the rental market in your area, and you will be able to decide on a fair rent for your property. If the rent you have decided is higher than the other similar unit, you need to recalculate the rent. If you want to charge higher rent, you must provide better facilities than other similar properties. If you provide the same facilities, it will be difficult for you to find a tenant.
If you still find it difficult to calculate the rent, you can get help from apps and software. You can easily find tools that provide you with a rental estimation based on comparing similar properties. These online tools save a lot of your time and save you from overcharging your tenants.
Checklist for a rental home
It is very important to prepare your property for renters to get a good return on your investment. It is even more important if you rent your property for the first time. We have a checklist for you, which will help you to decide if your property is ready to welcome tenants or not.
- Firstly, you have to focus on curb appeal. The house should look attractive and pleasant.
- Secondly, it should be very clean. Hire professionals for cleaning indoor and outdoor to attract tenants.
- It should be properly maintained. Before listing, do all repair and paint it fresh.
- Adding more amenities will make it more attractive, and you will be able to get good rent as well.
Keep in mind that maintenance and repair of the house are your responsibility, even if tenants live there. The investment property you have brought might be ready for rent. On the other hand, it may need more investment to make it rental ready. Here investors make a mistake, usually. If there are some maintenance issues, they don't try to fix them; rather, they avoid or cover them as if they don't exist. However, they become a big issue and cost more money after some time.
Usually, you don’t need to spend a lot of money to make your house rental ready. Small renovations can make your home attractive for tenants.
Make your property attractive.
The house's appearance contributes a lot to make it attractive for renters. You can do it by making little changes. For instance, if there are large trees around the house, cut the overgrown branches to give a clean look. Mauve the lawn and trim plant; it looks like the house is properly cared for.
Cleaning is another important thing, which makes your house attractive. Walls, ceilings, kitchen, bathrooms, everything should be clean and tidy. Clean carpets and wooden floors, clean doors and electricity boards, every little thing matters.
A freshly painted house gives a very clean look. Light color gives a spacious effect and a large look too small spaces. It will also hide the signs of recent repair, making your unit more welcoming for tenants.
Do necessary updates
Updating your property for renters is not about spending large sums of money. You can make small changes like
- Clean the carpet. If it is burned or has stains that cannot be cleaned, consider replacing it with a new one.
- If the appliances in the home are very old, you can replace them with new ones.
- Change the dripping taps in the kitchen and bathroom.
- Replace broken tiles in the bathroom and kitchen.
All the fixtures and appliances should be in working condition, check them properly and get them fixed by professionals.
Keep in mind that you have to do all these things before adding your house to the listing. Potential tenants should not see your house in an unfinished condition. The first impression is very important and to attract tenants, it must be very good.