Today, over 43 million housing units are occupied by renters in the United States. And even with that consistent rise, there continues to be a high demand for space to rent and not enough supply in return. Answering the problem to that statistic marks great opportunity for investors whose main bread and butter is in property rentals. But as with any industry that sees fluctuation, there is a risk of stagnation if you don't grow your business with a clear trajectory in mind.
Thankfully, there are a few things you can do to successfully grow your rental business.
Hunker Down on Good Marketing
Without occupants, you don't have a stream of revenue to rely on. Since that is an obvious essential for growing your business, you'll want to make sure that your marketing efforts are effective and active. The tips written in our Miami guide apply for any location, since there are basically three essentials to think about when marketing your rental properties - Creating attractive visuals, providing immersive information, and having both an online and offline presence.
Even though there are many potential tenants, the role of your marketing is also to specifically attract the core market of your choice. If you want quality tenants, then how and where you advertise your rentals plays a big role. This applies both for your existing properties and new ones you plan on acquiring.
Plan Out Your Expansion
It's natural to consider more properties so you can have different demographics in your reach, but you'll want to consider your own financial eligibility for loans before acquiring another property. While you may already have profitable investments, you have to look beyond what you have if you want to expand.
First off, your debt-to-income ratio should ideally be lower than 36% to qualify for a mortgage. Note that lenders will also do a credit check to ensure that you can be a reliable borrower. According to Petal Card, the biggest factor that indicates your creditworthiness is your ability to pay your bills — including your loans — on time. So if your payment history is squeaky clean, on top of having a good debt-to-income ratio and other factors, you would have no trouble applying for a loan to expand your rental business. On top of the financial considerations, though, you'll also want to expand your real estate knowledge so that you can make the right pick based on current market trends.
Invest in Property Management
Though you may feel more comfortable being hands-on with your own real estate portfolio, hiring out can be a practical choice if your ultimate goal is growth. There's only so much you can manage in one day, and putting too much on your own plate only risks oversight and burnout. If you have a good property manager, they can handle much of the day-to-day necessities on select properties so you can seek out other avenues of expansion with ease.
You will still be able to have the final say on major decisions and have tabs on everything, but your time will be significantly freed up since you won't have to personally take care of every repair, screening, or on-site operation that needs to be done. You can get an official quote based on a Rental Analysis of your existing properties.
Make Sure Your Investments Are Diversified
Any step you take towards growing your business comes with risk. This is especially true if you're only relying on one avenue for profit. Even if you have multiple properties, it's better if you don't have just one type of property under your belt. Consider looking at different markets and dipping your toe in varied sectors. If one takes a dip, you'll have some financial security from your other investments.
Nick Lioudis writing on Investopedia notes, in his breakdown on the importance of diversification, that it is a reliable technique to make sure your risk is more balanced out despite the volatility of any given market.
Look Into Partnerships for Growth
When taking the risk, financial cost, and time management into account, forging trustworthy partnerships can become an attractive option to seek out. Though not always necessary, partnerships can help speed up the rate of growth simply because you can pool together your resources. This is essentially the option to take if you aren't necessarily keen on taking out a huge loan in order to fund your rental expansion.
On top of easing your own financial burdens, it also creates shared responsibility. This way, you don't have to go about every operational necessity on your own. A good rule to stand by, however, is divvying up roles before engaging in an official partnership. This is just one way to avoid disputes down the line. It's important to have a transparent collaboration with clear guidelines and expectations.
Though there is no single formula that applies to every single entrepreneur, these guidelines should be a solid outline for you to forge your path and grow your business.
Article was written by Renata Jordan
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