The following is a guest post on profitability in real estate by Phoenix, Arizona’s Avky Inc.
Rehabbing and selling a property in today’s real estate market can be done and it can also be profitable. However, rehabbing real estate and holding it for rental purposes can be a financially and emotionally rewarding experience. It can also become the experience from hell if not done correctly. There are tricks of the trade that will allow you to maximize your profits and minimize your headaches.
So, you have already bought cheap a property. You have already saved on Materials and you hired yourself to complete the project. Very good!! Now let’s look at the steps to create a win/win rental situation between your tenant and yourself. Please remember our goal is to make money in real estate right now!! Also remember that saving money is moving it to the bottom line. So saving money is making money in a sense. Let’s get started.
Profitability: Pictures And Videos
I’m sure you’ve heard that a picture is worth a thousand words. I have a personal saying. A good picture is worth two thousand words and a phone call. What I’m getting at is that you need to take quality exterior and interior pictures of the rental property. Your pictures should ideally be in a common format and size for different uses. A good overall format would be .jpg and the size of 640×480.
The reasons for the pictures are two fold. The first reason is for print and online advertising. The second would be to document the condition of your rental property prior to renting the property. This protects you as well as your tenant. I’d also suggest doing a walk through with a video camera with the time and date stamp activated.
Profitability: Advertising – Free
Advertising is a key part of your real estate business. How is anyone going to know that you have a rental property available, if you don’t tell them through advertising? As you know there are various forms of advertising. I personally like to use free advertising for the obvious reason. It’s free… There are literally hundreds, maybe even thousands of free classifieds ad sites where you can place your real estate rental ads. You can also post your real estate rentals on facebook, twitter, digg, etc… Be creative, use your quality pictures, and write good and informative ads. You will get great results.
Profitability: Tenant Screening
This is a very important step in the process. If you short cut in this step it could potentially cost you a lot of time and money, by having to pay to have a tenant evicted. You should create a tenant screening system for yourself. This system should be performed the same way each and every time. I don’t care if it’s a referral from your best friend. Do your tenant screening process the same all the time. It protects you as the landlord/property owner and the perspective tenant at the same time.
I suggest using a service that will provide you with a perspective tenants background records, public records and prior eviction status. This will give you a snap shot of who your perspective tenant really is. When you do your reference checks, make sure you call the landlord prior to the current landlord.
The reason for this is because the current landlord will say good things about a dead beat tenant that they want out of their property. The landlord prior to the current landlord has nothing to lose by telling the truth.
Profitability: Preparing Your Lease
Congratulations, you’ve found an acceptable tenant for your rental property. It’s time to prepare the lease and riders for your new tenant. As with the tenant screening process this step is very important. If you’re not comfortable preparing your own lease and riders seek legal advise. However, it’s not difficult at all.
The lease is the longest document. There is no need to re-invent the wheel on this one. There are plenty of pre-printed forms at your local office supply store. You can also find them online in PDF form fill formats. Make sure your lease is appropriate for your state and/or city. There may or may not be other riders that need to executed along with the lease. Again, your state and/or city will determine this.
One way to increase your bottom line is to give your tenants performance incentives. When I structure my leases I add an extra say $10.00 to the lease amount. I tell the tenant if they pay their rent on time that they can deduct the $10.00 from the rent.
I know what you’re thinking. Why would I deduct $10.00 from the rent if they pay on time? Why am I rewarding them for what they are supposed to be doing anyway? It’s simple. It works and the rent less the $10.00 is your true rental amount anyway. You get your full rental amount each month and on time.
The tenant feels like they’re getting a discount. It’s a win/win situation for both of you. If you follow these simple steps you will be on your way to making money in real estate right now.