Top 10 Keys to be Successful in Rental Property Investment

in collaboration with PropertyGuru.my

Real estate is indeed one of the lucrative industries. The millions of profit posted by real estate companies are an actual manifestation of how profitable this industry is. With the ever-surging population in Malaysia and its environment, the market is likely to remain even more vibrant and highly profitable for a few decades to come. But, this is a highly competitive industry and finding the best niche to invest in is critical. One of the most lucrative and promising niches in this market is the rental property investment.

Real estate investments attract huge income due to ever increasing rental demand. The large migration of the population to urban center promises constant revenue. As a matter of fact, the market cannot meet the demand for a house for rent in PJ. But you must be very smart when investing in rentals especially if you are a newcomer.

Here are 10 keys to be successful in rental property investment

1) Proper management

Management is a fundamental element in real estate industry. Without proper management skills and practices, you cannot survive in this industry. Big money is at stake, and thus good management of both the revenue collected and the property is crucial. Remember that the government tightly regulates the industry. You need to keep up with tax obligations, pay the workers and also maintain the property in good shape. Proper management is also necessary for dealing with tenants at a professional level and also in professionalizing the operations of the rental estate.

2) Start small

Whether you have millions of dollars to invest in this industry, it will be prudent to start small and grow as you understand the market. This is an industry that requires close monitoring to determine the direction it is taking. Investing huge amount at once as a starter might backfire on you. Starting small will help you to build the capacity and at the same time learn the market dynamics. You might find that the mode of rentals you started with is not sustainable and thus need for diversification.

3) Location

Whether you're buying a new property or building it from scratch, the location must be strategic. Many tenants will be interested in specific areas and facilities such as schools, stadiums, shopping malls, bus stations, churches, temples, and others. Having your investment close to such facilities will be prudent. If you are targeting workers, then you should locate your rental property near the city where people can walk home or where it will take them few minutes to drive to work. Such investment is likely to attract a huge number of tenants and also better rental charges. This will translate to bigger income and higher returns on investment.

4) Figure out the right rental rates

The amount of revenue collected is determined the rental charges and the number of rental units. Figuring out the appropriate rental rates to be charged should be the first thing. The facilities on the property are among the factors that will dictate the rental rates. If there is a swimming pool, playing grounds, parking lots, and others, the rates should put them into consideration. You will also need to check with other properties around offering similar facilities and gauge how much a unit is going at. Avoid overcharging as this would scare away potential tenants. At the same time, undercharging would cost you revenues. Make sure the rates are market competitive.

5) Know your numbers

When starting with investment, you should be very smart. One thing that real estate market is known for is the brokers. There many brokers who are raking in millions of commissions for virtually doing nothing. They are known for inflating figures so as to increase their cut. Before buying the property, do your research and have a rough estimate of its value and the income that is likely to earn. You should also factor in the possibilities of undertaking renovations, maintenance and to some point insuring the property. Take these expenses into account and evaluate the viability of the property before making the purchase. It is also wise to sample different properties to get the best investment.

6) Get professional help

For your rental estate to operation efficiently, the input of the professionals will be necessary. Real estate is a huge industry, and some areas require professionals. Where necessary, get professional help. From the start, there is a need to have real estate lawyer to assist you in the process of purchasing the property including the search for its authenticity. Other professional that you need are construction engineers to confirm that the property is in good shape. Property valuation experts will be of big help in determining the current worth of the property and the possible revenue that can be collected. All these experts will guide you into making the right decision.

7) Focus on sustainable cash flow investment

Though capital growth is what makes you rich in this industry, cash flow is necessary for this business. You need money to sustain the investments. Flowing cash will also be necessary for other investment ventures that may emerge along the way. It will be weird if you have a huge investment and yet have difficulties in accessing quick cash. Find the perfect rental property invest that guarantees cash flow always. Monthly rental properties are the best investment that you can make in PJ. House for rent in PJ is skyrocketing, and the cash flow is guaranteed.

8) Minimize expenses

To maximize profits from your rental property investment, you must reduce the expenses and avoid losses. If not properly managed, you can suffer huge losses due to huge costs. Cutting costs is a key factor to becoming successful in rental property investment. Make sure that some of the expenses like utility bills (water, electricity, and garbage, etc.) have been transferred to the tenants. This transfer of expenses will significantly ease pressure on your finance. Reducing the trash pickups, negotiate lower rates with vendors and shop around for better rates are also ways of minimizing expenses. These are few ways of reducing expenses.

9) Screen you tenant

One of the biggest headaches in rental investment is dealing with rogue tenants. Some are troublesome especially when it comes to paying rents on time. Some may be trouble makers and always having quarrels with other tenants. It is, therefore, crucial to screen the tenants before signing a rental contract with them. You need to find if they will honor rental contracts and mostly paying rents on time. It will be necessary to get references with former landlords to see if you can accommodate them or not.

10) Treat tenants well

Tenant is an integral part of the rental property investment. Without customers, there will be no income from you invest. Being the owner of the property does not mean that you look down on them. You should treat them fairly and nicely. Create a good relationship with them if you want to be successful in this market.

 So, there you go..

These are the 10 keys to be successful in rental property investment. These keys are crucial particularly if you are new to this industry. Many will be interested in getting rich quickly, but with these factors, there is more than making big money. Demand for a house for rent in PJ is still high, and the market is promising. If you follow this guide, you will mitigate a lot of risks that comes naturally to rental property investment.

Note: This post was in collaboration with PropertyGuru.my .