How to Grow Your Rental Business

 

Growing Your Rental Home Business Using Equity Reinvestment

Once you start building your rental home business, the potential for growth is self-generating. Over time, each property builds equity which you can re-invest in both property improvements and down payments on new homes to add to your portfolio. Equity is a powerful asset in any real estate investment business. This is especially true with rental home,s where the business model is designed to steadily build up equity in each property over time.

How can you use equity to grow your business? Reinvestment is an effective strategy for any real estate investor.

 

Methods to Access Your Rental Property Equity

Renters are already slowly but surely paying each rental property mortgage and building your equity. How do you access that equity and make use of the funds? There are three popular methods.

Home Equity Loan

A home equity loan allows you to borrow against your equity, gaining access to the cash value of each property that you already possess in the form of a fixed loan. This is sometimes called a second mortgage.

HELOC

A home equity line of credit or HELOC is a rotating loan where you can borrow and repay as much as you need in rotation. This is ideal for repairs and upgrade projects and the money doesn't have to be used on the HELOC'd property. 

Cash-Out Refinance

A Cash-out refinance is when you refinance your mortgage at a higher amount than you strictly need. The extra loan amount is a way to transform equity into cash-in-hand.

 

Benefits of Equity Investment in Your Rental Properties

The equity already accumulated in your rental properties has a lot of potential. Currently, it is not earning you anything, simply building up to total property ownership. But with a little planning and financial strategy, you can put that equity to use by acquiring new properties or improving the properties you already have.

Make a Down Payment on a New Rental Property - Without Selling First

When you find a promising new rental property, the downpayment is a serious investment. While you might normally sell a house to buy the new property, with equity funds, you don't have to. Using an equity loan or cash-out refinancing, you can access the cash you need

The cost of buying a new investment property doesn't have to come from selling a property first. Instead, you can extract some of your equity from property that's partially paid off. Those funds can go toward your downpayment on the new property immediately while the opportunity is still available.

Turn Static Equity Into New Income Sources

Buying new rental properties with your current rental equity allows you to open new income streams. As soon as the new property is ready for a tenant, it can start earning. Depending on the neighborhood and home quality, you can charge enough to cover the new home's expenses and accelerate your ROI on the equity loan or cash-out refinance.

By using the money (property value) that you already possess, you can quickly increase your rental income and long-term earning potential.

Upgrade and Repair Your Portfolio Properties

In addition to buying new properties, you can also put rental equity funds toward property upgrades and repairs. After all, an up-to-date rental has a better earning capacity than a home that becomes shabby or outdated over time. While minor repairs may be included in your annual budget, major upgrades like new appliances, roof reinstallation, or timely renovations can be paid for with a HELOC, equity loan, or cash-out refinance funds.

Planning ahead for long-term rental profitability sometimes requires sizable reinvestment. With access to your equity funds, you can put the value you've earned in a property right back into keeping that property desirable and competitive as a rental home.

 

Growing Your Rental Business with Property Management Insights

If your goal is to grow your portfolio, you have more options than you might realize. By accessing the equity that you have already accumulated, you can invest in improvements and new properties to watch your potential for returns continue to expand.

Accessing your rental property equity is a pro strategy learned from years of property management services. If you're looking to expand your portfolio and your skills in maximizing long-term profitable rental homes, Leaf Management can help. Contact us today to learn more.

Upscale Rentals

 Evaluating Rental Potential in Upscale Neighborhoods

If you're looking for a quick way to profit from real estate, buying and renting out upscale homes seems like a smart investment. However, things are not always as they appear. It's true that luxury and high-end properties can rent for more and provide higher returns. But not all upscale properties are the same. What makes a property upscale and the factors involved in profitable rentals can vary quite widely.

At Leaf Management, we've seen it all. Let's dive into the meaning of luxury and upscale rental, along with the pros and cons of such investment plans.

 

Upscale Property Rental Myths

First, let's start by dispensing with a few upscale real estate myths. Many rental investment buyers have a few notions about luxury rentals that just are not consistently true. They can be true, but you can't count on them and disaster can strike in the times when these three common assumptions about luxury real estate prove wrong.

"Luxury Rentals Are Already in Top Condition"

First, homes in upscale neighborhoods are not automatically low-maintenance.

What makes a property "luxury" is not always high-end materials and great maintenance. Sometimes, an upscale property is in a crumbling yet beautiful historic building on a high-demand downtown block. Or a glorious estate with failing plumbing and flickering old wiring. Luxury is about what people will pay for it, not necessarily the structural integrity or upkeep quality.

"Rich Tenants are Better Behaved"

Do not assume that high-paying tenants will be more respectful of your property. Wealthy tenants are just as likely (if not more) to throw raging parties and expect you to pick up the bill.

"You Can Rent Any Property You Buy"

Not all upscale properties can even be rented. Always read the fine print. Many condo associations and gated communities drastically limit the number of properties that can be rented, and the quota may already be occupied. So don't buy an upscale rental property unless you're sure it can be rented.

 

The Pros of Investing in Upscale Rental Homes

What are the advantages of investing in upscale and luxury rentals? Even after removing the myths, these pros are clear for the world to see.

1. Tenants Pay More for Luxury

You can ask a much higher rent for luxury properties, especially in high-demand areas like downtown and prestigious neighborhoods. If you got the property at a good price, upscale rentals can be quite profitable.

2. Property Values are Probably Rising

When it comes to resale value, upscale locations typically see a steady climb in property values. Therefore you can rent the place out for a while and resell at a profit, in most cases.

3. Separate Market Stability

The luxury real estate market is separate from the typical housing market in any region. Wealthy residents create a more predictable demand providing more market stability if your property meets the required standards.

 

Cons of Investing in Upscale and Luxury Rentals

Of course, as with any investment, there are potential downsides. These are most likely to manifest for investors who are not careful in their research when selecting a property and property management strategy.

1. High Investment Cost

Luxury properties cost more, which means a higher initial investment cost. This, of course, means you also have more to lose should your investment go awry or prove less profitable than you initially calculated for.

2. High Maintenance and Upkeep Cost

Upscale properties can cost far more than expected in maintenance and upkeep. After all, you must use high-end materials for repairs and maintain top-of-the-line appliances. Most importantly, expect to save back about 1-2% of the property's sale value per year for repairs. Anything you don't spend, save for those big repairs like roof replacement and water heater repairs - just like a normal rental property.

3. Tenants Have Higher Expectations

Lastly, wealthy tenants have higher expectations from your property management service. They are more likely to demand repairs and be impatient with delays because they are paying more to live in luxury, and you are providing the property as a service.

 

Succeeding in Upscale Property Rental with Leaf Management

If you have selected the right property and prepared for the predictable expenses, you can make a tidy profit from renting out properties in upscale neighborhoods or investing in luxury homes. The final piece of the puzzle is a capable and experienced property management team to handle maintenance, repairs, and tenant care with the aplomb and responsiveness that your upper-crust tenants have come to expect.

At Leaf Management, we know exactly how to optimize an upscale property for profitability as a rental home. Contact us today to learn more about luxury and upscale property management services.