If you’re acquiring or redesigning a rental property, use research trends and track evolving societal demands to drive optimal net operating income.
To ensure your rental property brings in as much money as it can, these 10-points are recommended for your close consideration to escalate a rental’s desirability and profitability.
1. The Neighbourhood
Familiarizing yourself with the city in which you’re buying is the first step in choosing a rental property. You’ll want to make sure you’re choosing a property in an area that’s desirable. If you can’t afford an apartment or home in the area’s most popular neighbourhood, figure out which ones are up-and-coming and look there — you’ll likely make a more significant return on your investment by choosing a zone that’ll be at its peak desirability in a few years’ time.
You should also investigate the vacancy rate of other rentals. If they’re all full, you have a good chance of leasing yours, quickly.
2. Your Budget
You can’t buy a rental property without first figuring out your home-buying budget. Speak to a trusted mortgage broker. You’re better off crunching numbers, first. Pre-Approvals are highly recommended before you start visiting open homes.
In that way, you can figure out how much money is left over from month to month — you’ll want to have some carrying costs on-hand in case you don’t have tenants locked down for any period.
Once you know how much you can afford, then begin your search. You don’t want to buy something outside of your set parameters — even if the rent coming in is right, you don’t want to put yourself in a tight spot should you be unable to find the right person, immediately.
3. Kitchens and Bathrooms
You won’t be living in your rental property, but someone will. And there are some features that will help sell the place to potential renters. Today’s real estate market is all about kitchens and bathrooms, so focus your updates here. Updating the kitchen appliances, painting the cabinets, and swapping out the countertops will completely revamp the property’s culinary centre. Fresh tile, updated hardware, or a new showerhead will make even the smallest bathroom look more modern.
The good news is that any renovation of these spaces will only add value to the property you’ve purchased. If you decide to sell your rental down the line, then you’ve set yourself up to profit from your purchase by sprucing up the bathrooms and kitchen.
If your rental property is a family home, get in the mindset of parents who might consider renting. Their first concern will probably be the quality of schools in the area. So, be sure to examine the potential school districts in which you can buy. Either choose a home in a good area so parents will be pleased or select a smaller property for couples or young professionals who won’t be as concerned about public schools.
5. Nearby Amenities
Finally, get into the mind of your renter and figure out what nearby amenities will entice them to settle. If you’re purchasing an apartment, the building’s features will be of the utmost importance. Popular features include security systems, common rooms, and a fitness centre.
If you’re renting a home, the amenities there will come with the neighbourhood. Along with schools, see how far the place is from grocery stores, public transit links, parks, restaurants, and entertainment venues.
City dwellers will already know how important of a feature this will be for some renters. The availability of a parking spot — or, at least, ample street space — is an essential feature to some. Even if your renter doesn’t need parking, you can use an included space to your advantage and potentially rent it out for an additional sum each month.
7. Average Rental Price
In a perfect world, your rental fee will more than cover your mortgage, so you can make money from your property without lifting a finger. Of course, this is a luxury that many landlords won’t have right away — it might take some time for prices to catch up to your monthly mortgage.
Still, you should be familiar with the average rental price in the area in which you plan to buy. In that way, you can quickly calculate how much you can expect to pay off your mortgage after the rent from your tenant comes in.
8. Planned Development
Even if you’re buying in an established area where it seems as though there’s no space to develop anything more, you should still reach out to the local planning department. They’ll have the blueprints if there’s any impending construction or development of the neighbourhood in the works. You’ll have a hard time finding tenants who want to live in the heart of a vast construction project, so a long-term plan could deter you from buying something you cannot market later on.
On the other hand, knowing there’s development in the works might be a plus for a property that appears to be in the middle of nowhere now. Just make sure it won’t be happening right next door, or else potential tenants will be turned off.
As with any extra-large purchase, you’re going to have to buy homeowner’s insurance for your new property. That might not be a huge expense on its face, but you should still be mindful of important additional insurances, Landlord Protection, for example. Worth its weight in gold, if ever needed.
10. Property Taxes and other related Accountancy Expenses
We highly recommend potential landlords have at least a basic introduction of expectations from a trusted Accountant. Your rental income may cover your mortgage, for example, but you’ll still have expenses to consider. Your requirements will vary dependent on your preferred ownership structure, i.e. held personally, owned by a Company or Look Through Company (LTC), or, by a Trust. But, in any event, you will be required to compile rental property summaries, ensuring to maximise deductions; Filing to the IRD; and, completing and receiving an Income Statement and a Tax Summary for your records is all critical.
In closing, and if budget allows – give thought to Irresistible Amenities/Smart Upgrades
Renters prefer anything that makes life easier through technology. Property managers and renters alike can benefit from making upgrades in these areas.
- Kitchen fit-out: dishwashers, gas or induction cooktop, and other integrated appliances.
- Large closets
- USB charger duplex receptacles
- State-of-the-art fitness centres in apartment complexes.
Interested parties are encouraged to request an appraisal appointment and Goodwins will follow up within 48 hours.