Have you always dreamed of making passive income by owning real estate investment properties? If so, you are not alone. As an investment property owner, you can expect monthly cash flow by renting out your house, build equity, and create an investment portfolio that can serve you for the remainder of your life. Who would not want to take advantage of this investment opportunity? The truth of the matter is while owning a rental home and generating cash flow sounds easy enough, there are many complexities that go into the daily grind of Rocklin property management.
Deciding to Rent Out Your House
Many property owners have an emotional attachment to their homes. It is where a life was built, memories were made, and every square inch of the property was cared for. Now you are considering handing this sentimental keepsake into the hands of a stranger? Yes. It comes down to a simple solution. Math. While property management teams do their best to find high quality tenants who care for your home, pay rent on time, and report maintenance when needed, we understand it can be scary to make the move from owner occupied to tenant occupied. Maybe your situation has changed over the years and it is time to downsize, move closer to children and grandchildren, or travel the world. Whatever your reason, when deciding if your home would make a good rental or not, Rocklin property management companies suggest you do the math: expected annual rental rate minus annual mortgage, minus taxes and insurance, minus maintenance, minus vacancy loss equals cash flow.
Determining a Rental Rate for Your Home
Conducting a rental market analysis on your home to determine a rental rate is crucial to your success of maximizing cash flow on your rental property. If you set a rental rate too high, you run the risk of prolonged vacancy and prospective tenants walking away disappointed. If you ask for a rental rate that is too low, you will find renters immediately, but they might not be the high income renters you were hoping to get and you will walk away knowing you could cash flow more than you will receive. Look at local classifieds and drive the surrounding neighbors within a three to five mile radius. Determine the square footage of the property, lot size, bedroom and bathroom ratios, any updates or upgrades that have been done to the properties, amenities, and quality of the neighborhoods. Rocklin property management companies also compare security deposit amounts and lease term lengths.
Property maintenance can be somewhat unpredictable. The worst situation a landlord can put themselves in is to be unprepared for maintenance costs. At RPM Select, we advise property owners to set aside one month of rent each year to account for maintenance. However you decide to set aside this money is up to you. Some homeowners put away about ten percent each month, while others take a lump sum at the start of the year and store it away. Remember that the older the home, the more maintenance you will have on it. Newer homes have lower maintenance costs.
Calculating Vacancy Loss
Look at the vacancy rate for the neighborhood and comparable properties that your rental property is located. Calculate how much income your rental property should produce. Be conservative in your estimate. Remember to account for any rent increases that will be given throughout the year. For example, if your property will produce $27,000 in a year, and your neighborhood vacancy rate is 4%, you can calculate your vacancy loss like this: $27,000 x .04 = $1,080. Rocklin property management companies generally lock tenants into a 12 month contract. We caution property investors to not sign lease contracts longer than 12 months because rental rates can change quickly in a short amount of time and you will want to increase the rent as the market increases. You cannot give a rent increase to a tenant who is locked into a lease agreement at a certain rental rate. You must wait until the lease agreement expires to enact a rent increase.
High Quality Renters in 2019
The stigma of the word “renter” has drastically changed over the past ten years. Recent data collected by the US Census shows that the number of high income renters has increased by 1.35 million people between the years of 2007 and 2017. High income was defined as those making $150,000 or more annually. That is a 175 percent increase. This data confirms that there are qualified renters throughout America who are seeking rental properties instead of purchasing a home. As Rocklin property management teams work around the clock to advertise and qualify prospective tenants, this data suggests that you can be certain that you will find a tenant who will respect your house and pay rent on time each month.
How You Can Succeed with the Experts at Rocklin Property Management Team, Select
Now is the perfect time to rent out your property. As more homeowners make the shift from owner occupied to renter occupied, they are turning to Select to help them avoid costly mistakes. Our experienced team has a proven track record of helping investors reach their financial goals, while protecting their investment. At Select, our leasing times are faster than our competitors, our eviction rates are low, maintenance costs are in check, and our respectful renters maintain our client’s properties. Call the experts in Rocklin property management today.