A rental property is a great way to bring in a passive income and invest in your future. Whether you are just starting out with a rental apartment or an apartment building with eight units, it is essential that you take some measures to ensure your rental is successful and stay in the black. Here are some tips to help you invest in a rental apartment and keep it lucrative.
Research Market Rent
As you start out searching in a market for a rental apartment to buy as an investment, you should get a good idea of how much apartments and similar rental units are rented for. The market rent of an area can be different than a neighborhood located just across the freeway, and the rental rates can also fluctuate due to changes in an area's economics. For example, if housing prices in an area are increasing at a high rate, the rental rates are going to increase in the same manner. Because renters and homeowners are both looking for housing in the same market, you can expect both of these to match one another.
Having the right information about the rental rates of an area is important so you can advertise and rent your apartment in a timely manner. If, for example, you advertise your rental apartment at an amount that is too high for the area, renters are going to recognize this and no one will want to rent your apartment. However, if you ask too little in rent, you will rent it right away but will lose out on your rent potential.
Review the Numbers
When you understand what the amount of market rent is for an area, you can start to calculate the cash flow on a potential apartment investment. You will want to find a property that will bring in more cash flow from rent that you will end up paying in the property's expenses.
For example, if you are looking to buy an apartment building four-plex that you can rent each unit for a total of $4,000, your expenses on the property should be less than $4,000. The expenses will include the mortgage payment for the apartment building, the property tax, and property hazard insurance.
You will also need to cover the landscaping costs and snow removal if you live in an area that has cold snowy winters. Also be sure you calculate any utilities that are not included in your tenant's rent, such as trash removal, sewer, and water. Be sure you also consider repairs and savings to go toward lost rent when any of your tenants move out and before you rent it to a new tenant.
For more information, contact an apartment investment advisor.