Real estate investors owning rental property are always interested in finding ways to increase their cash flow returns and overall return on investment.
Making money in real estate is the byproduct of investing in rental properties with high ROI, i.e., high cap rate, high cash on cash return, and high rental income. A single family property is an ideal buy and hold strategy reaping long-term financial rewards and real estate appreciation, given the right location and the right tenants.
Not only are real estate investors accumulating appreciation on the single family property, but they are also making rental income to pay down their mortgage payments. Choosing the right tenants is of utmost importance, and landlords must treat their tenants as business partners and stakeholders to growing their real estate investment business and the bottom line.
Related: How residential real estate investing will secure your financial independence
Maximize Your Rental Income from a Single Family Property
1. A single family property must be in a prime location and a safe neighborhood
It’s important to capitalize on the right location and the right neighborhood to maximize rental income. This goes without saying, but a safe neighborhood is necessary for a single family property, because families want to raise their kids in safe neighborhoods. This step requires property real estate market analysis and much due diligence to decipher and identity lucrative opportunities in the best real estate markets.
If you are a beginner investor, consult a real estate agent to guide you through your search in finding the best single family property respective to your financial resources and long-term business vision. As you build your real estate investment business, you must acquire the right education in becoming your own expert. Successful real estate investors are well engrossed in the business and know exactly how to find the best positive cash flow properties and beat the competition. So, long story short, without investing in the right location, real estate investors hurt their chances of maximizing their rental income in real estate investing.
2. A single family property has high rental demand
Capitalizing on a single family property in a prime location gives landlords/real estate investors the leverage to increase their rental income incrementally. Keyword here is incremental. If your rental income is way above the market average, this puts your rental property at high risk of vacancy. But if you increase rental income gradually, you can maximize your profits and keep your vacancy at minimum risk. To emphasize, landlords can have the autonomy to increase rental income if their rental property is in a good location and safe neighborhood. Buying a single family property in a run-down neighborhood will only yield high vacancy and inconsistency in rental income.
3. A single family property must be nearby school districts and parks
In tandem with the previous point, choose to buy a rental property or, in this case, a single family property in a neighborhood with nearby amenities, such as schools and parks. If you are targeting families, it only makes sense to choose an area compatible with families and raising children. Without nearby school districts, parks, and public transportation, real estate investors will find it extra challenging to rent out their rental property. Investing in rental properties is only half the equation, the other half is to invest in the right neighborhood.
Real estate investing tips to find the right neighborhood for a single family property:
- Do not discount parks, green, and open space
- Commercial districts with local shops and restaurants
- Coffee shops and entertainment venues
- Surrounded by nature
Related: Become an Expert on Return on Investment Analysis in Real Estate
4. A single family property must be in a tip top shape
Do not underestimate the power of a good looking rental property. To attract the right tenants, make sure the rental property is in a good shape and one which does not require major or even minor repairs or renovations. The more money you spent on enhancing the rental property appeal, the higher the price. Do not delay repairs on a house, be always up to date with keeping your investment property in a tip top shape.
5. A single family property is kid friendly
This one goes without saying! If you are targeting family tenants, choose the right location, the right neighborhood, and the right rental property compatible with raising children. A family will place high value on a rental property in a safe neighborhood, more so than on the rental income.
6. A single family property has good tenants
To boost rental income, landlords must be very picky in choosing the right tenants for their single family property. It usually takes 3-6 weeks to find the right tenants. Run background checks, ask for references, interview potential tenants more than once, and conduct the right due diligence to make the right decision. A happy tenant keeps your rental income in check, a bad tenant adds to your expenses and burns a hole in your pocket.
7. A single family property has tax advantages
Tax deductions are a major incentive to invest in real estate. Owning a rental property is a business, so make sure you know the tax advantages and deductions surrounding real estate investing. As a result, real estate investors are entitled to write off expenses for running and operating their business.
Some common tax deductions in real estate include:
- Mortgage expenses
- Travel expenses
Related: All You Need to Know About Owning and Managing Residential Real Estate Properties
To maximize your return on investment and increase your cash flow returns, make sure you conduct the right investment property analysis to arrive at the right rental property for your business. Formulate your business plan and strategize accordingly to meet your short- and long-term goals. Without a clear plan, real estate investors won’t reap big financial rewards and sustain a growing real estate investment business.
Comment below on other ways to boost rental income in real estate. If you liked this post, head over to Mashvisor blog for more goodreads.