There’s no doubt that people who get an annual checkup at the doctors have a better idea of their own personal health and wellness. A rental property can also benefit from an annual checkup so that you can determine what is working, what is not, and what needs to be done to maximize profits and make your business run even better than last year.
Landlords who are in tune with their rental property, the neighborhood and even the area real estate market will have a much easier time benefitting from the boom times and getting through the lean times. Acting as a doctor and psychiatrist to your own rental property is the best way to keep your real estate investment healthy.
Here are 3 things to examine when it comes to the overall health of your rental property:
1. How is the neighborhood?
Whether you are a long-time owner or a recent real estate investor, there’s no escaping the fact that neighborhoods change over time. Location is everything, whether someone is renting or buying. If you purchased your property more than a few years ago, you may not be paying much attention to what’s going on around you. Sometimes, the familiar blinds us so that we don’t see clearly, so take a good objective look at what is happening in the neighborhood where you property is located.
On the one hand, your neighborhood could be experiencing lots of new development and revitalization, with more amenities being included right nearby that are real perks for renters. Common neighborhood upgrades might include parks, a mall, a new light rail stop nearby, a new school and even a new apartment complex or subdivision.
A neighborhood on the downturn can mean that there is not a lot of development and interest in the area by residents or community leaders. You may start to notice lots of homes for sale in the neighborhood, as well as lots of vacancies in rental properties. Remember that high vacancy rates in an area might force you and the other landlords to lower your rent amounts in order to attract and keep tenants. Rising crime, big businesses closing or relocating, and struggling schools are other things that might signal that the neighborhood is going through some rough times.
2. How does your property serve your ideal tenant avatar’s needs?
As a landlord, you should have a tenant avatar, or a description of the perfect tenant for your place. If your tenant avatar doesn’t match up with the kind of property you own, you either need to change your expectations of the right tenant or change your property, either physically or via marketing.
For example, say your tenant avatar is of young urban professionals, either a single person or couple. If you own a cozy 1 bedroom condo, don’t advertise that it is located near great schools and the local playground. Instead, focus on how close it is to public transportation hubs and the new business park being built a few blocks away. On the flip side, if your area is a hot spot for families, and your two bedroom single family home isn’t attracting many qualified parents, it may be time to invest in the property and add a bedroom to get the attention of families looking for a long-term rental.
Another thing you need to assess when making sure your property reflects your ideal tenant include possibly updating and upgrading areas of the property to keep up with the competition. If a new complex has opened up in your same neighborhood, and they are offering brand new everything, you might need to take a long look at your own property’s needs to prevent all the most qualified applicants from going over there.
3. What’s costing you the most and how can you change it?
Owning property can lead to incredible returns, but it can also be a real drain on the budget. It may be time to take a close look at some of your highest costs over the past year and evaluate whether there’s something you can do about it to reduce the impact on the wallet.
For example, if you are paying for the utilities as part of the lease agreement, but your heating and cooling costs keep climbing, it may be time to talk to an HVAC specialist about options on improving things, from a new furnace to adding insulation to the attic. Another example is that if you are constantly getting bad tenants who do lots of damage or break the lease, yet you are doing your own background checks on applicants to save money, consider paying for the services of a background screening company to get the right tenant in your property the first time.
Whether you own a condo in the city, a cottage in the country, or a suburban single family home, your rental property needs to be as healthy as it can be to help you reach your financial goals and give you peace of mind as you do your landlord duties to keep the business going. The advantages of evaluating the state of the property and the neighborhood annually are huge, and the most successful landlords do what they can to give their investment a clean bill of health.