How to make money as a landlord long-term may seem obvious, but the details are important. Here is Mashvisor’s guide to investing in rental property with a long-term view for a return on investment.
Making Money with Rental Property – Long Term Strategy
One of the most common questions from new rental property investors is how to make money as a landlord long term. Most first-time landlords focus on quickly generating positive cash flow from their rental property. That is a wise rental strategy. However, beginner landlords who are buying a rental property would be wise to carefully consider how to make money as a landlord from a long-term rental property. Mashvisor is a site that helps those investing in rental property. Here are Mashvisor’s tips for landlords who want to make money long term from their rental property.
How to Make Money as a Landlord Long Term – Find a Great Property
Owning a rental property means first searching for a good one to purchase. Mashvisor has a great set of real estate investment tools to help with the critical first step. A heat map analysis uses a “heat filter” to help highlight the difference in performance between different regions. It can also help a real estate investor to determine the best locations within a neighborhood when searching for an investment property. It is easy to learn how to use a heat map analysis to buy the best real estate investments. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Related: Investing in Income Properties Using a Heatmap: The Way to Go
Rental Property Management – Maintenance and Repairs
Start with a proper investment property. This is important whether you are investing in a short-term rental property or a property that will rent on a long-term lease. Avoid purchasing any property that includes common money-pit issues. These can include lead paint, asbestos and other hazardous insulation types, wet basements, and septic systems. Use a professional home inspector to look for issues that can cause you long-term problems and bust your maintenance budget. Some properties can be burdened with design flaws that can drive up your rental expenses.
Related: Residential Property Management: Here’s How to Do It Yourself
How to Make the Most Money as a Landlord – Reduce Your Costs
Reducing costs starts with our suggestion above of finding a rental property without high maintenance and repair costs. However, that is just the beginning. Carefully consider your top-line recurring costs. Property tax is typically the highest rental expense for any property. Property taxes can vary from street to street. So too can the costs for required services such as trash removal. Most communities require that a landlord pay the cost of water and sewer for rental properties.
If your rental property is a condo, there will be condo fees as well. These rental expenses all vary from property to property. A key to how to make money as a landlord is to choose the property with the lowest long-term rental expenses and then work to reduce whatever costs you can.
Mashvisor has a rental property calculator that helps investors determine which are the best real estate investments based on the estimated costs and more. Learn more by reading: How Can You Use a Rental Property Calculator to Buy the Best Investment Properties?
How to Make Money as a Landlord – Increase Your Revenue
Once you have found a property with low rental expenses, it is time to focus on earning the highest possible rental income. The key to this is signing the best tenants to a lease. But what makes for a great tenant? The answers are intuitive but worth listing. For example, tenants who will pay the rent each month and on time. In most areas, landlords are allowed by law to screen tenants based on credit. Establish a set of credit requirements you feel are appropriate for your particular rental property. Screen fairly for tenants that meet your requirements. This may mean passing up on a tenant that does not meet your requirements and missing out on a month or partial month of rent. Remember, you are investing in real estate for the long term. A tenant that does not pay in full on time can be a year-long problem.
First-time real estate investors and landlords often struggle with how to find tenants. Seek help. An experienced realtor is a valuable partner in your long-term rental business. Ask your realtor how they search for tenants. Watch them as they go through the process of screening tenants and learn their methods. Using a professional realtor from a respected agency also helps to protect you from liability. Be sure you know exactly what landlords are allowed to screen for and apply those parameters fairly for each tenant that applies.
When possible, always opt to sign a tenant that plans to stay longer than one year. When trying to analyze how to make money as a landlord, eliminating the costs of turning over tenants is key. A long term tenant will reduce your realty fees, personal time involved in searching, and your maintenance costs. Work within the law to find tenants, but always keep in mind that one planning to stay longer than one lease period is worth more than a tenant that will leave as soon as a lease expires.
One often overlooked strategy related to how to make money as a landlord long term is seasonality. Buy your rental properties in spring or winter This will allow you to then rent during the peak season for highest rents which is generally the summer. Leases also do not have to be 12 months. Landlords are allowed to vary the duration of a lease. If you sign a tenant to a lease in the off-season, tell them in writing that the lease may renew for a period of less than or more than 12 months so that you can re-align with the summer rental season. Rents are higher during the summer. Take advantage of seasonality.
To learn more about how Mashvisor can help you make faster and smarter real estate investment decisions, click here.