The real estate business can be quite profitable if you know how to act and what to do to increase your profit. We’re not talking about professionals or agents but about everyday persons looking to explore this domain.
Basically, there are two ways in which you can profit from a property. You can either rent it out or you can increase its value and then sell it to make profit.
If you decide to buy a property and then rent it out:
There are several aspects to take into consideration such as location which has to do with other elements such as:
- The type of tenants likely to be searching for a place to stay in that area. For example, if you have an apartment close to a university, it’s likely that students will rent it but if it’s a house in a quiet neighborhood in the suburbs, then chances are a small family will move in.
- The vacancies. If you’ll have students as tenants, then you can safely assume the vacancies will be between fairly predictable intervals (summer vacations, holidays, etc.)
- Another element which could influence the possibility of your property being rented out is criminal activity. So, before you buy, check out some reports, ask around and try to find out as much as you can about this aspect. A safe environment is appealing to a lot more people.
- You should also try to figure out whether or not those moving in have job opportunities in the area. For example, if a big company just opened a headquarters in your neighborhood, there will be people looking for a place to stay there so they can be close to the workplace. However, this also depends on whether or not the company has a positive effect on the area or not.
The amenities also play an important role. If there’s a gym, a mall, a movie theater or public transport hubs in the area, this attracts renters. A simple thing such as not having to walk a long way to the supermarket can be a decisive factor for someone looking to rent a home.
And, of course, there’s the price. Try to find out what the average rent is in the area before you buy and figure out whether it’s profitable or not.
If you decide to buy a property and increase its value so you can resell it:
This is called capital growth and has to do with a variety of aspects such as the upgrades you make to the property. These can include:
- Replacing the pipes. Someone looking to buy a home has more requirements than someone who wants to rent the place for a short period of time. So it’s important for them to know everything is in order. By replacing the pipes you reassure the potential buyers that they won’t have to worry about this aspect for a long time.
- Taking care of the electrical work. This is something that’s usually done before starting a renovation. So if someone considers buying your property, they’ll be pleased to know this issue has already been taken care of and they can start turning the place into their home right away.
- Replacing the windows and/ or doors. Potential buyers would rather get a place that costs a bit more but already has new windows and/ or doors than a less expensive one which doesn’t because they appreciate not having to go through all the trouble of upgrading these features themselves.
- Kitchen and bathroom upgrades which can include new countertops, new tiles, a restored tub, new faucets, etc. The kitchen is the most expensive room to renovate so anything that’s already taken care of is appreciated, especially if this leaves the room is good condition overall so it can be used right away.
Apart from these usual upgrades, you can also attract potential buyers with some extra features.
- For example, a beautiful garden will increase the value of a house. The same thing goes for the yard, terrace, deck or patio.
- Another extra detail could be checking for damage or leaks in the roof and replacing some missing pieces or other similar things.
- A house or apartment with a good AC system which works properly or which has been upgraded would also have an increased value.
- And then there’s also the storage issue. A place that offers plenty or enough storage is superior to one that doesn’t so take a look around and see whether or not you should add some extra shelves, a closet, a cabinet, etc.
Regardless of the strategy you choose (rental income or capital growth), it’s important to always leave room for customization so the one moving in can make the place their home. So if you want to rent out the place, don’t decorate the walls with artwork that you like because not everyone has the same taste and if you want to sell the property, perhaps it would be better to let the new owner get all the appliances instead of offering something that you picked out and leaving them no other choice. Also, pick neutral colors for the walls and the décor in general.