Buying and renting out real estate is a tried-and-true way to develop wealth over time. Not only can you build equity in the property simply through appreciation over time, the rent collected can cover the carrying costs.
While there are a number of different types of properties that can be rented out for investment purposes, many investors look to condos. They’re typically cheaper to buy compared to single-unit dwellings, and are virtually maintenance-free. With property management on site to handle the day-to-day maintenance of the common areas of condominium buildings, all the grass cutting, snow removal, landscaping, and other tasks are handled for you.
But in order to make sure that your investment pans out over the long term, it’s important to take steps to protect the value of your investment condo. Here are a few tips to help ensure your investment goes according to plan.
1. Maintain Regular Communication With the Condo Board
Even though you don’t live in the building, you still want to make sure that the condominium remains a safe and positive place for residents. The condo board has a direct influence on this; these individuals make decisions that affect the well-being of the building. What they choose to do can literally affect the value of the building as a whole, and even impact your profits.
Is the board adding necessary amenities? Are they promptly dealing with issues that residents have been complaining about? Are they increasing the condo fees unnecessarily? Issues such as these can impact the value of the condo, as well as your profit margins.
Since you’re an owner, you have the right to vote for those who have been nominated for a seat on the condo board. If you so choose, you also have a right to take one of these seats yourself, as long as you’re voted in. Understanding the health of the building and its corporation can give you important insight into whether or not the condo remains a solid investment, or whether you should bail out and park your capital elsewhere.
2. Visit the Condo Frequently
Unless your tenant calls you regularly to update you on the daily occurrences in the building, you’ll want to get a first-hand glimpse of the state of the complex yourself. When you visit the condo to pick up your rent check or any mail, take an extra few minutes to walk around the building, identify any possible issues that should be rectified, and ask your tenant if there is anything that should be looked into, regardless of how minor you might think they are.
Rather than depending on other owners to communicate their concerns to the condo board or property management team, you can do this yourself. At least you’ll have first-hand knowledge of what’s happening in the building, and can follow up with the board on your own to make sure any issues you’ve witnessed are being handled properly.
3. Collaborate With Your Tenants
It goes without saying that tenants can make or break your investment. A good tenant is critical to ensuring that your long-term investment is a fruitful one; on the other hand, a bad tenant can cause you nothing but headaches, and can severely affect your profits.
After you’ve thoroughly screened your tenants, established an open, honest relationship with them. Collaborate with them and make it known that they are essentially a part of your investment “team.” No matter how temporary their home will be, most tenants appreciate the opportunity to take pride in their home.
Let your tenants know that you will do everything possible to make sure the property is well-maintained and continues to be a great place to live. Make them understand that they play an important role in this, and encourage them to report issues the moment they’re noticed. Cultivate a positive and respectful landlord-tenant relationship that’s based on honesty and co-operation.
4. Be Smart With Your Rent
You can’t just arbitrarily pick any random rent amount to charge your tenants. Obviously, the more you can charge, the better for your bottom line. But the reality is, you need to stick to a certain range that the building and the neighborhood dictate. If other similar units in the building are going for $1,000 per month, for instance, there’s little justification to ask prospective tenants for $1,500.
Before you even consider buying a condo unit, make are that the rent you can realistically charge will adequately cover all carrying costs. Understanding current market rates in the area is critical when it comes to establishing the appropriate rent for your unit.
You’ll need to determine how the rent you plan to charge will work to cover your mortgage, maintenance fees, taxes, repairs, and other expenses. Keep in mind that you’ll have to declare your rental income come tax time, so make sure you’re saving up so you’ll have enough to pay Uncle Sam every year.
The Bottom Line
Having a clear objective about what you want out of your investment is critical to making sure the decisions you make are the right ones. Maintaining the value of your investment is essential to ensuring you get the most bang for your investment buck. Be present, be vigilant, and be smart about how you handle the property, your tenants, and your capital.