Having a rental property at your disposal can be a huge benefit to your financial status, assuming that you are not propping it up with an excessive loan. Real estate, in general, is inflation-proof and provides property owners with a stable source of passive income. But, that does not mean that you, as a property owner, do not have work cut out for you. Here are a few factors you need to consider when dealing with rental properties:
Furnished or unfurnished
In a competitive rental market, having your property furnished is the difference between getting tenants or standing idle without income. But there are certain things to consider when it relates to furnishing.
A fully furnished property usually appeals to a distinct demographic, and this group generally comprises transient, short-term tenants, for example, students and young working adults.
Your ready-made home is appealing as it allows these nomadic individuals to quickly come and go without the drudgery of dragging along heavy furniture.
Even better, a fully furnished property usually enjoys a higher rental rate, meaning that you can transfer the cost of furnishing to your tenants. But, bear in mind that your maintenance cost will also be higher and you might need to periodically journey over to your property, performing checks to ensure that the furnishing is up to living standards. There is also the risk of unruly tenants damaging your furniture.
Speaking of nomadic tenants, some landlords do not like the idea of tenants moving in and out at a high frequency, as this increases the risk of them getting terrible tenants. They prefer to maintain long-term but reliable tenants.
Regarding long-term tenants, this group may prefer to have their own furniture in the dwelling, as according to their tastes and preference. Hence, a fully furnished property may be less attractive to them. The choice of furnishing or not depends on the type of tenants you are targeting.
Cultivating good relations with tenants
Greenhorn landlords often assume an employer and employee relationship with their tenant, and this mentality can be a problem. As landlords, they have to understand that the caretakers of the property are the tenants, and a tenant holding grudges may lash back by sullying their charge.
In the worst-case scenario, the destruction caused by the tenant is so terrible that you have no choice but to renovate the property to bring it back into shape. And those new to the renting business should also be aware that it is a long, costly and tedious process to evict a tenant. Smarter tenants will wait it out during the length of their tenancy and create trouble only during the last few months of their stay.
Ideally, a prudent landlord sees his rental property as a business and the tenant as a customer. After all, a good tenant provides a steady and dependable flow of passive income, which goes a long way towards repaying your mortgage. The idea is to retain good tenants while keeping out the troublesome ones.
One way to better service your tenant is by attending to their complaints promptly, such as a leaking roof or a burst pipe. And be flexible if they are not paying their rents on time. Call them up and discover if the late payment is deliberate or circumstantial. Those struggling to make ends meet should be given a reasonable leeway and they, in turn, will remember to repay your kindness.
Closer to the heart
Unless agents are being appointed, it is inevitable for landlords to journey occasionally to their rental properties to perform check-ups and maintenance work. Purchasing your rental property nearby to your home cuts down a huge amount of transport cost, and time wasted during transit. Also, having it close by makes it easier for you to drop by to collect the rent.
However, having all your eggs in a basket is also a risk. The value of your property is highly sensitive towards the economic condition of the area it is sited. A possible net outflow of residents to another region drops the demand for real estate, hampering the capital appreciation of your property. By diversifying your portfolio into multiple areas, the risk is mitigated. Here, the choice is between convenience and risk
Good apples, bad apples
We often hear stories of tenants from hell, and this is a common issue in the renting business. To reduce legal problems and unnecessary hassle, an astute landlord can ferret out good and bad tenants from the available pool.
Some of the basic assessments you can perform qualifies your potential tenant via two simple determinants—ability to pay and attitude. These factors work hand-in-hand as is demonstrated through a tenant who is financially able to pay your rent, but not desiring to do so. Then others are willing to pay but are unable to do so due to financial obligations, other circumstances or a mix of both. Good and bad tenants exhibit certain behaviours that reflect either their internal disposition or financial condition. You can find out more about this at Screening for the right tenant.