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Recession tips: How to convert real estate into income generating property
Undoubtedly, these are difficult times to invest in real estate. But well-planned investment
may still generate good return. No doubt, this is not the time to make mistakes, since in this
environment any mistake can turn out to be very costly. There is no margin for error and
key to successful investment lays in its execution. Here are some helpful recession tips to
consider when you want to turn your real estate into income- generating property:
Undoubtedly, these are difficult times to invest in real estate. But well-planned investment
may still generate good return. No doubt, this is not the time to make mistakes, since in this
environment any mistake can turn out to be very costly. There is no margin for error and
key to successful investment lays in its execution. Here are some helpful recession tips to
consider when you want to turn your real estate into income- generating property:
- Know who you are targeting: Before investing in any property, you, as an investor,
need to know to whom you can rent the property. Renters are usually students,
young professionals, singles, divorcees, temporary employees, and elderly whose
children are grown up. You don’t see often a couple in their thirties with two
children renting a property. Knowing your target renters will allow you to plan ahead
to maximize your rental income.
- Know your potential tenants’ needs: Renters have several things in common:
- Good location: Renters look for good location. Location is always important
whether you are buying the property for yourself or buying it to rent. Look
for properties close to metropolitan areas, public transportation, downturn,
colleges, and entertainment places as they usually are amongst the most
sought after locations for renters.
- Use your space judiciously: Adjust your room size and format depending on
your targeted renters. For example, if you are targeting students, try to
convert big rooms into smaller functional rooms that are ideal for students or
young professionals.
- Price: Pricing the rent is very important especially in the current economic
environment when everyone is on a tight budget. Do not overprice your
rental, even if your property is in a better shape compared to your
competitors. The reason behind it is that you do not want to leave your
property on the market for a long time for several reasons. First, it will take
more of your time to find a potential tenant who would be willing and able to
pay your monthly rent. Second, the longer it takes for you to rent the
property, the more it will cost you at the end. On average, people move every
2 years. So, if it takes you 5 months to rent a property, you are loosing
already 21 percent of your rent annually. This means that even if you rent the
property at your ideal price, you may not end up profiting from a higher rent.
During recession, the common wisdom strategy is to be less picky about little
differences in price and rent your place as soon as possible.
- Be flexible in your plan if you want to maximize your profit: Having a clear plan
on how best to optimize your profit is important. For instance, if you have a three
bedroom apartment next to a college or metropolitan area, consider subleasing each
room separately. While sublease may involve additional responsibilities, it usually
ends up being more profitable for the landlord. In fact, subletting each room is a
very common practice for property owners who live next to universities.
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