So, You Bought an Apartment Building: Now What?
Owning an apartment building as an investment property can be a great way to earn some extra money, but it can also be disastrous if you don't approach it properly. If you have just become a landlord, you'll want to get started on the right foot. Here's what you need to know to do it right.
Price Your Property Effectively
Your first step is to determine how much you will charge in rent for your units and the length of your lease terms. If you price too high, you may have difficulty finding tenants. However, if you price too low, you will miss out on additional income. Look at other similar properties in your area and price your apartments accordingly.
You'll also need to decide how long you will require tenants to commit to your lease. Longer leases provide more stability. Aim for a balance between the two to maximise your income while still retaining steady income from long-term tenants.
Choose the Best Tenants
When you are first starting out, it may be tempting to accept any tenant who applies, just to get some income rolling in; however, you could be setting yourself up for disaster if the tenants aren't desirable. Take the time to conduct thorough background checks and to verify all the references of applicants before accepting them. You'll save yourself a lot of headaches down the road.
Learn the Laws
The legal requirements and protections for both landlords and tenants vary from state to state, so it is crucial that you familiarise yourself with the laws in your area. This is for your own protection and can help save you from issues in the future. Make sure you are in compliance with all regulations at all times.
Make Strategic Improvements
When making modifications or improvements to your property, focus on those areas that will give you the greatest boost in rent. For example, beautiful cabinet fixtures may look great, but they are unlikely to increase the amount of rent you can charge. On the other hand, a fresh coat of paint and replacing cracked powerpoints and rusting fans can make your property more desirable, and ensure you secure the best rent possible.
Conduct Regular Inspections
Although it may feel uncomfortable to enter your units when there are tenants living in them, this is something that you will need to do from time to time. You want to make sure that your tenants are taking proper care of the property and that nothing has become broken or damaged. Aim to check each unit quarterly or as the lease permits.
Hire a Property Management Company
Managing an apartment building can be quite a time-consuming endeavour. If you are looking at this as an investment to bring in a side income, you may wish to consider hiring a property management company, like Darwin Rental Specialists, to handle the day-to-day aspects of managing the property for you.
An experienced property manager can help you keep up with repairs, find new tenants, accept rent payments, manage tenant complaints and more. You'll have to pay your property manager a management fee, which will cut into your income, but that tax deductible expense may be well worth it if you prefer to be more hands-off with your investment.
Overall, managing an apartment building can be a great way to build your property portfolio and generate extra income. If you follow the tips outlined here, you should be well on your way towards generating solid income that will keep you comfortable financially for the rest of your life.