The closing papers are signed, sealed, delivered and—just like that—you’re more than an investor, you’re in the real estate business. Just like in any business, success starts with the product. In real estate, the product is the property.
In our experience of almost ten years in the business, curating and managing hundreds of turnkey properties for investors, the equation that gives you the best opportunity for better returns is predictable and proven: it’s one-part quality property, one-part quality customer service. Although it’s an easy formula, so few professionals put it into practice.
Over our next two blog posts, we’ll be unpacking what you can do to control your property’s ROI. While some factors are out of your control, like an unexpected busted pipe or an economic hiccup that impacts your tenants, we know that attracting the right tenants is a massive factor in consistent cash flow with your investment property. In this post, we’ll tackle how a quality property is the first step to getting desirable tenants in the door. Next time, we’ll focus on the other side of the coin—customer service .
Having premium tenants in your property can be the difference between losses and gains. Attracting quality renters consistently leads to shorter vacancies and longer tenant stays. It means paying down your mortgage and creating wealth.
Putting the right upgrades and improvements into my personal portfolio of properties has been a formula for success and that formula is what we have used for our Turnkey Properties business model.
Give tenants what you would want
Pew Research reports rental rates for middle-aged adults have increased, and a decade after the Great Recession, there are more renters now than at any point in the last 50 years. As interest rates continue to rise, more and more people will be pushed out of the home buying market, creating competition for clients.
Because various factors have led to a renter’s market, renters have many options. You want tenants to pick your property over competitors to minimize vacancies and get your property cash flowing quicker. How does that happen?
A quality rental home with curb appeal and interior updates is more likely to be chosen over another home in the neighborhood without these features. We have found that adding curb appeal such as simple landscaping, a clean yard and exterior paint will attract far more interest than a property that is not well-kept and looks tired or heavily used.
We have found that vinyl plank flooring in high-traffic areas not only opens up the space, but helps the property show well, as it looks very close to hardwood flooring. If you have carpet in your bedrooms or anywhere else in the house, they need to look new, or at the very least, refreshed. Matted-down carpet with stains gives the sense that the landlord is not interested in replacing items.
If you have watched HGTV, you know kitchen and bath updates are important. In kitchens, hard-surface vinyl plank or ceramic tile flooring makes a good impression. Also, updating the countertops, painting the cabinets white or black, and adding new kitchen cabinet hardware, new faucets, and lighting.
In bathrooms, it is also best to add hard-surface flooring with tile tub surround, new vanities (if not new, painted with new cabinet hardware), new faucets, and lighting. Throughout the rest of the house, adding decorative ceiling fans, new designer light fixtures, and new door hardware will give the house an updated look, which will blow away your competition.
Putting in effort and investing in these upgrades are critical in today’s rental market because we know through experience that well-maintained properties lead directly to quicker occupancy and a better renting experience for tenants and owners.
Better tenants, less vacancies, more income
What else can a nicer property do for you? With an attractive, updated and well-kept property, you can ask market rent or even more. For a tired-looking property you may have to ask for below-market rent or accept a less desirable tenant. A quality property isn’t just about attracting more potential tenants—it’s about being able to choose from a field of better-qualified applicants and retaining those tenants.
In a competitive market, a quality property commands quality tenants. It’s simple economics that a desirable property attracts more tenants, which means you get to be choosier in picking the right applicant for your property.
Nicer homes retain tenants longer. You never want to hear that a tenant has moved out because they found a “better” or “nicer” rental home. Your rental property is the vehicle that reduces the chances of tenant move-outs. While the look of the property is critical, you should be equally concerned with addressing deferred maintenance items.
In addition to updates and the overall look, a well put together renovation also addresses the issues that could cause future repairs and stress for the tenant. No one wants to constantly call their property manager for maintenance requests. If maintenance issues persist, tenants have choices, and will likely move out when their lease expires.
You can’t control everything in your investment property. There will be inevitable, basic maintenance costs, broken faucets, electrical shorts, HVAC servicing, etc. That is why it is important to control what you can, especially when those things have positive (and profitable) effects.
When making your purchase decision, take into consideration what your chosen property looks like versus other homes in the neighborhood. Cheaper is rarely better. As you think of your investment property as more than just a property, but an individual home for your tenants, that mindset shift will serve you well to attract—and keep—quality tenants who will make your high-quality rental property their home year after year and make your investment a profitable one.