From the time I started working on this blog up to this day, I’ve noticed that more people have gained interest over remote property investment. I’m happy to see this trend, but those who are planning to apply this property investment strategy should keep in mind these three tips before they start out:
Control your need to renovate
Majority of remote properties I’ve bought have been used as rental vacation homes.
Thus, when I was starting out, I had this uncontrollable desire to make every inch of my properties picture perfect. I focused too much on the ornamental details on the ceilings and the floor without regard for the cost. In the end, I spent too much on renovating the property.
Moreover, there is an average rental price range in every location and having the most elaborate living space won’t convince tenants to pay higher than what they perceive is the fair market value. Simply put, renters focus more on practicality over aesthetics, so it doesn’t make sense to spend too much on renovations. If you do, you’ll only hurt your potential profits – or worse – fail to attract tenants in the first place because your expenses have forced you to charge too high.
It’s not just me. The desire to renovate everything is a common mistake with first time remote property investors.
Rather than use your time and money in unessential details, you should just complete the minimum work required to make the property liveable and safe.
Calculating the proper rent
Dough Roller from Money Management suggests that remote investors should follow the 1% rule when calculating rent.
What is this 1% rule? This simply means that rental income should always equal at least one per cent of the home’s total cost to the investor.
They key to maintaining the 1 per cent rule is through strict budgeting of home improvements and other costs.
Beware that this formula won’t result to immediate yields, but it can be a good gauge on how much will be a property’s total yield in the future.
Another factor you’ll have to consider when calculating rent is a property’s future appreciation in value. If you are able to maintain and hold on to your remote property investment for a couple of years, there’s a big chance that the value of your property will increase. And if you decide to sell it to another, you’ll be confident that it can sell for far more than your initial investment.
Don’t just own a property, manage it!
Property management is the deciding factor on whether your remote property investment will become financially successful or not. However, not many remote property investors focus their effort on this phase of property investment.
Property management includes advertising vacant rooms, screening potential tenants, dealing with any maintenance issues and fixed promptly, as well as sensitive tasks such as eviction and mediating tenant disputes.
All of these elements may be difficult for an inexperienced investor to handle at first, especially with remote investments. Therefore, it’s very important for you to do your homework. Read up on property management so you’ll know what to look for. Be knowledgable of basic landlord and tenant rights in the countries you have properties in.
If these tasks are too much for you, you may have to hire a property manager you trust. Although this will add to your expenses and shrink your profits, having a well managed property is always better than all the headaches you’ll end up with because of mismanagement.
If you enjoyed this article, there are tons more waiting to be read in the archives section! Click away to learn more about remote property investment!