Purchasing a home is getting more and more affordable. In fact, it is now estimated that homeowners pay half as much for their monthly mortgage than renters pay for their rent. It doesn’t help that rental rates rose 3.2% on the national level last year, which was partly driven by the number of rental properties available--or lack thereof, really. In 2014, the rental vacancy rate fell to 7.6%, the lowest number in decades.
The Demand for Rentals Continues to Rise
Using simple supply and demand logic, the increasing preference of people to rent instead of own allows us real estate investors to take a step back and evaluate the opportunities in the rental market.
Tips to Maximize Rental Income
As is the case with most transactions in the real estate industry, renting out a property can be a very time-sensitive operation. Thus, we here at Catalyst Funding have put together some tips to make sure you’re getting the most out of your rental in the Houston market.
- Keep your rentals in good shape. This includes keeping up with the maintenance and repairs both before and after you have tenants. If a property is in good condition, there will be higher interest from potential tenants, and if you continue to keep it in good condition, they will be more likely to renew their lease every year. A little extra expense now can really increase your rental income down the road.
- Price your rentals correctly. Speaking of income...once you have your rental property in good shape and ready to rent out, you have to find that sweet spot in pricing. If you price your rental too low, it will fill quickly, but you could potentially lose out on thousands of dollars in rent; if you price it too high, it will sit on the market for a while. Once again, you’ll be losing out on the cash flow from rent. We highly encourage you to hire a realtor, as he or she will be able to accurately tell you what the market rate is for your property.
- Screen your applicants thoroughly. Bad tenants are going to happen, but these instances can be minimized if you thoroughly screen your applicants. Trust us, it will save you a lot of money in the long run, as well as headaches. Also, evictions are both time consuming and costly; it is estimated that it costs nearly $2,000 to evict someone.
As more and more Millennials are starting to look into their housing options, it’s important to look at the trends. And, to put it simply, they definitely prefer to rent. Part of this is because many Millennials are not saving for a down payment to purchase a home. Another reason is because the younger generations are more likely to move around the country, thus opting for the flexibility that comes along with renting.