Do you know a successful investment property when you see it? Whether you’re an experienced investor or someone who is thinking about buying a rental home, you need to know what a high performing property looks like if you want to enter the market and be successful.
As professional property managers and investors ourselves, we have a unique understanding of why investments succeed and why they fail, especially in the Myrtle Beach market, which includes Conway, Socastee, Surfside Beach, and Murrells Inlet.
So, we’re taking a look at the key features of a well performing rental property. Here’s what the right investment home requires.
Location Always Matters in Myrtle Beach Rental Real Estate
Location always matters when we’re talking about real estate no matter where you are. Whether you’re buying in a suburban Carolina Forest neighborhood or on the water in Murrells Inlet, you need to know what the location has going for it and what challenges it might present.
Properties that perform well are in attractive locations by your ideal tenant’s standards.
Think like the tenant you’re hoping to attract. Your investment property will be profitable if it’s near good schools, easy commuter routes, and conveniences like shopping, restaurants, and entertainment. Tenants will want to be close to recreation. They’ll need to know they’re in a safe neighborhood. They might want to enjoy all of the local attractions without feeling suffocated by tourists.
Pay attention to neighborhoods when you’re shopping around for an investment property. The location will impact your rental value, the types of tenants you’re able to attract, and your vacancy rate. Homes that are more remote or in heavily commercial areas will likely bring in less income and take longer to rent out.
High Performing Rental Homes are Well-Maintained
Renting out a well-maintained home is the best way to ensure your property performs the way you want it to from the very first day you own it. Maintenance is always going to be important. It matters before you buy, it matters while you’re renting out the home, and it matters between tenants as you’re dealing with turnover repairs.
Though the situation is different for everyone, we normally recommend a “fixer-upper” for anyone looking to purchase a good producing income property. With the high selling price of new homes in the current Myrtle Beach and Conway markets, purchasing a new built home can be challenging to get it to cash flow, and the value of the home tends to increase much slower than what you would see with the forced appreciation that can be gained in a home that needs major renovations. When they are purchased for the correct price, we see homes that require repairs generating a much greater ROI (return on investment) than a new home would produce.
A lot of investors will be drawn to a rental home that’s aging, deteriorating, or in need of a lot of renovation work. These properties tend to be less expensive than a new home, and you can be enticed into putting your own personal cosmetic touches on them.
Renovations and rehab work can be expensive undertakings, and you will be delaying your cash flow until the repairs are complete. The longer it takes you to bring your property to the rental market, the less you’re able to earn on that property, which is why we use quality construction crews to complete the projects in a timely and efficient manner. Doing this will generate a home that looks like new, for often less than a new home would cost, can have better upgrades than the standard builder grade materials used in a new home.
Look for a well-maintained rental home that may need basic cosmetic repairs and updates. Have a complete inspection made before you close on the property, and spend some time budgeting for what repairs will cost you going forward, once you own the home and have tenants living in it.
Maintenance is important, but you need to go a step further than simply maintaining your property if you want to have a successful investment experience with a rental home that performs well.
Investment properties that perform well are updated and improved when necessary. This will ensure your rental is safe, modern, attractive, and welcoming.
You don’t have to go overboard with the renovations, and the updates should be justified by the location, size, and cost of the home. Granite counters and marble floors would not be something that would be a wise investment on a smaller home in a slightly less desirable neighborhood. However, tenants expect to see upgrades and higher end finishes in larger and more upscale homes, especially when they are in the higher end of the rental market. No matter the type of home, your improvements can and should always be cost-effective. Your goal is to ensure your property remains easy to rent out and earn rents that are as high as possible.
Attracting and retaining high quality tenants is a key part of making sure your property performs well. Tenants are more likely to rent homes that have been recently updated. They don’t want appliances that are 20 years old or carpets that are stained and fraying.
How Do We Know a Property Will Perform Well? Know Your Numbers
Performance can often feel relative, and the success of your investment will depend on your investment goals.
To know whether you’re likely to see the performance you’re expecting with your rental property, you need to decide what you’re hoping to achieve. Some investors are only interested in cash flow, and nothing else matters except what they’re earning in profit every month. Other investors understand that cash flow isn’t the only way to earn money on an investment, and they’re more concerned with appreciation and rising property values.
What indicates performance to you? Cash on cash return might be your only indicator of success. Or, knowing you’ll pass a valuable asset down to a future generation might be what you’re more interested in. Perhaps you’re looking for properties that will give you the nest egg you need for retirement. Depending on your goals and expectations, you’ll be looking at different properties.
To choose the right rental investment, you’re going to need some kind of an idea about how much money you’ll earn in rent and how much the property is likely to appreciate in value over time. As you approach your potential investment, think about how you’ll finance your investment and what you’re likely to earn in rent every month (a property management team like J&P Unlimited can help you establish this). You’ll also want to know if there are other potential revenue streams you should consider. Always over-budget for those expenses such as maintenance and vacancy.
High performing rental homes, obviously, make money. While there are certainly a lot of variables at the start of your investment process, you’ll need to have some idea of what you’ll earn and spend before you pursue a potential property.
Would you like some help identifying investment properties that are likely to perform well? This happens to be our area of expertise. So, if you have any questions about how to find or manage a rental property in our market, please contact us at J&P Unlimited. We manage investment properties in Myrtle Beach, Conway, Surfside Beach, Murrells Inlet, Socastee and the surrounding areas.