The best thing about property investments is the capital appreciation of your units and rental incomes. However, waiting for the capital appreciation to get high enough to turn it into cash when you sell it may take a long time. This is when rental income play a vital role to ensure you are winning the rental game. Since properties normally have rental limits based on your rental agreement or size of the properties, the question is – how do you maximise your rentals?
1. Crunching the numbers, focus on Return on investment (ROI)
When you want to invest, always know what you are investing in. Otherwise, it would be called gambling rather than investing. Like any other investments you should make the calculations and see whether or not the property of your choice are worth the money you invested. This is why I recommend you to use Return on Investment (ROI) as your main formula.
You must be interested in ROI rather than the total rental income you received. Why do I recommend the above?
“You must be interested in ROI rather than the total rental income you received.”
Lets take an example, you bought two apartments at:
General formula,
Return on investment (ROI) = rental income per year/total purchase price of property
1) RM 100,000
Rental income per month = RM 300
Rental income per year = RM 3,600
ROI = 3600/100,000 = 3.6%
2) RM 200,000
Rental income per month = RM 300
Rental income per year = RM 3,600
ROI = 3600/200,000 = 1.8%
Looking at apartments 1 and 2, which one would be a better investment?
It would surely be property number one! There are two reasons for this:
1) Apartment 1 has a better return on investment than apartment 2
2) This means that with lower amount of capital (apartment 1), you can obtain a better returns than using higher capital (apartment 2) – thats amazing.
This part of the article is considered as a gem in the property investing game and many property investors overlook this part which made their money grow slow or in other cases – results in a bad investment. You are in great advantage to read this.
2. Focus on multi-family complex properties
While you may think a bigger and more expensive property will give you better rental returns – it may but not as frequent as a multi-family complex properties. So what is a multi-family complex?
It is basically properties that have multiple units in one building or complex such as flats, apartments and even condominiums. Most successful property investors gained their cash cows from investing in a multi-family complex. The main reason why these types of properties are the best investment is because the rent is still affordable on most occasions and these units are suitable for temporary stay. Normally, people on general would opt for a landed house if they wanted to settle down. Those who decided to rent are:
- Families (be it short or long term)
- Students
- Office workers
- Tourists
Eventhough these types of properties are slightly difficult to sell, it would not be a major concern if it is situated in a prime – hot area.
3. Keep track of rental market
With a property in your hand, you must treat it like a business when you are making investments. Simply renting it out may give you a decent return – but also keep in mind that rentals will increase with the value appreciation of the property. Hence, always keep track of the market rental rate around your neighbourhood area and also the value of your property to get the most out of your rentals.
4. Find and keep good tenants
This is one of the factors that most investors take lightly. With good tenants, they will help you look after your property properly and most importantly – pay your rentals on time. By doing so, your unit would have lesser damage, have longer rental returns because you want to keep good tenants, and lesser headaches! One of my properties is currently being rented out to a kind married couple and even after a year of them staying there, the house still looks like it was renovated few weeks ago – I am quite relieved to have such good tenants. Eventhough they are renting it slightly below the market rate – I don’t mind because they gave me lesser things to worry and they are looking after my house very well. Therefore, finding good tenants will surely result in an unbelievable way to maximise your rental incomes.
The Hustler Investor 