Whether you’re a seasoned pro or you’re just looking for your first real estate property…

We’ve put together a list of 35 real estate investing tips that will help you avoid costly mistakes and create profitable rental properties.

Let’s get started.

Our 35 Rental Property Investing Tips for Real Estate Investors

#1& Choose a location with high rental demand

When it comes to choosing a city to buy rental properties in, it’s important to find an area where vacancy is low, and the demand for rentals is high.

This way, you’ll have a steady flow of potential tenants when re-renting, and you won’t have to worry about your properties sitting vacant. 

We keep an eye out for cities with a growing population because that means more people will be in need of housing.

#2 Create a budget spreadsheet before purchasing the property

Having a budget spreadsheet helps us make smart decisions and steer clear of any unforeseen financial troubles.

By breaking down all the financial aspects, we always have a clear picture of what to expect and how to plan ahead.

This spreadsheet should include all the expenses associated with the property.

This means considering not just the purchase price, but also the closing costs, any renovations or repairs needed, ongoing maintenance, property management fees, insurance, and taxes.

By accounting for all these costs, we have a comprehensive understanding of what it takes to maintain the property.

On top of that, we always project the rental income and estimate any potential vacancies so we can assess the investment’s potential.

This helps us determine the cash flow and understand how much money we can expect to make from the property.

By taking the time to analyze these factors, we are able to evaluate the property’s profitability and set realistic expectations for ourselves.

#3 Analyze the potential return on investment (ROI) before making any purchase

A crucial real estate investing tip is to analyze the potential return on investment (ROI) before making any purchase.

Evaluating the ROI helps us gauge the profitability of a property and make informed decisions.

To analyze the ROI, we look into factors such as rental income, property appreciation, tax benefits, and potential expenses.

Then we calculate the expected appreciation ROI, equity ROI, and the cash on cash ROI to determine if the rental property aligns with our investment goals and criteria.

#4 Consider the costs of maintenance, repairs, and upgrades

Don’t forget about the costs of maintenance, repairs, and upgrades!

When you own a property, you’re responsible for keeping it in good shape and attractive to tenants or potential buyers.

So, it’s essential to factor in these ongoing expenses when planning the budget.

One thing newbie investors often forget is to set aside a portion of the budget specifically for regular on-going maintenance tasks.

This includes maintenance like appliances, landscaping, water leaks, lawn mowing, snow removal, and paint touch ups.

In addition to regular maintenance, it’s crucial to plan for potential major repairs.

Think about things like the lifespan of your HVAC system or when your roof might need to be replaced.

By estimating these lifespans and allocating funds accordingly, we’re able to prepare for those larger expenses when they inevitably arise.

It’s all about being proactive and avoiding any unexpected financial burdens down the line.

#5 Invest in properties with good cash flow

Cash flow is the name of the game here.

It all comes down to the net income you generate from the property after deducting all the expenses.

To make sure you’re on the right track, aim for properties that can generate positive cash flow.

In simple words, the rental income needs to exceed the expenses in order for the property to cash flow.

The positive cash flow ensures that you will not be in the position where you need to take money out of your pocket every month to keep the property afloat, while also showing the banks that the property is self-sufficient.

#6 Screen tenants carefully to avoid problematic renters

We always make sure to screen tenants carefully in order to find reliable and responsible renters to avoid potential problems down the line.

During the screening process, we do thorough background checks to get a sense of the tenant’s history.

This can include checking for any criminal records or past evictions.

Employment verification is another important step.

Requesting references from previous landlords is also helpful, as it gives us insight into their rental history and behavior as a tenant.

Financially qualifying the tenant is not to be overlooked. It’s also a good idea to verify their credit history to assess their financial responsibility and ability to pay rent on time, check a recent pay stub or tax submission, and even go as far as proof of funds for 6-12 months of rent.

By screening tenants diligently, you can significantly reduce the risk of rent defaults, property damage, and other tenant-related complications.

#7 Hire a real estate property manager or portfolio manager to handle day-to-day operations

We consider the goal of investing in real estate to be time and location freedom.

And to get there, you need to outsource the day-to-day operations related to managing a rental portfolio.

Property managers can take care of advertising vacancies, screening potential tenants, collecting rent, addressing maintenance requests, and handling any tenant issues that may arise.

By entrusting these responsibilities to a property manager, we free up your time and energy to focus on other investments or personal commitments.

You can hire a property management company, or keep the property management internal by hiring an individual that works for you directly.

Keeping the property management internal will save you money, and increase the quality control over the property compared to hiring an external company.

#8 Stay on top of local rental laws and regulations.

Make sure to stay informed about local rental laws and regulations.

These laws can vary significantly from one jurisdiction to another, and it’s crucial to understand and comply with them to protect the investment and avoid any potential legal issues.

Before you invest in a new market, make sure you understand tenant rights, eviction procedures, rent control regulations, security deposit requirements, and fair housing practices.

One way to make this easier is to work with a real estate lawyer who can help you navigate the complex landscape of rental laws and inform you of any potential changes in local regulations.

#9 Build a strong network of real estate professionals

Establishing connections with trusted professionals in the real estate industry is key.

We always look to expand our network of mortgage brokers, lawyers, realtors, accountants and contractors.

And the networking of real estate professionals can help to hunt down good property deals, access various financing options with favorable terms, and get their properties renovated at reasonable prices.

#10 Invest in properties with good resale value.

When you’re looking for properties to invest in, it’s not just about rental income.

It’s also crucial to consider the potential for a profitable exit strategy by focusing on properties with good resale value.

While rental income is important, you want to make sure that your investment will pay off in the long run and that you will not lose money when you exit.

#11 Look for properties that have the potential to appreciate in value over time

Property appreciation refers to the increase in value that a property experiences over time.

To identify properties with potential for appreciation, consider factors like the location’s desirability, proximity to amenities, ongoing infrastructure development, and overall economic growth in the area.

Keep an eye on market trends and consult with real estate professionals who have their finger on the pulse of the local market.

This will help you assess the potential for future property appreciation and make educated investment choices.

#12 Research the property’s history and ask for documentation of any past problems

Always conduct thorough research on a property’s history and ask for documentation of any past problems.

Typically this happens during the due diligence phase once you have an accepted offer on the property.

Request documentation from the Registrar’s Office at City Hall to confirm proper zoning of the property, occupancy permits and any outstanding work orders on file.

These documents can provide valuable insights into the property’s legal use and any underlying issues that may exist.

#13 Build good relationships with your tenants to minimize turnover and maximize rent income

It’s a win-win situation that can help minimize turnover and maximize your rental income.

When tenants are happy, they’re more likely to stay longer, reducing vacancy rates and turnover costs.

So, how can you build those strong relationships?

Communication is key.

Be responsive to your tenants’ concerns and address maintenance issues promptly.

Show that you value their feedback and take their needs seriously.

We always look to establish clear and respectful communication channels, making it easy for tenants to reach out to us whenever necessary.

#14 Make sure the property is up to code and meets safety standards

It’s not just a legal requirement, but also essential for the well-being of your tenants and the protection of your investment.

Make sure to identify any potential code violations or safety hazards that may exist.

Take a close look at the electrical systems, plumbing, structural integrity, fire safety measures, and accessibility features.

This will help you pinpoint any areas that need attention.

#15 Invest in areas of the city and properties that will attract the highest quality tenants

We always look for ways to make our properties more attractive to A level tenants.

These are tenants who are reliable, responsible, and pay rent on time.

It reduces so many headaches by increasing the quality of tenants. You could even say that it will increase the quality of your tenant problems.

So we make sure to buy in desirable areas within a city, ensure the kitchens and bathrooms are updated, include ensuite washer and dryers, and price the unit at top of the market rents to attract the best possible tenants.

#16 Use leverage to increase your returns, but be cautious and avoid overextending yourself

Consider using leverage (borrowed money, like a mortgage) to increase your returns, but do so cautiously and without overextending yourself.

Leveraging can be a powerful tool that allows you to control a more valuable asset with a smaller upfront investment, potentially boosting your returns.

However, it’s important to approach leveraging with prudence.

Take into account factors such as interest rates, loan terms, and your ability to handle the associated debt.

It’s crucial to avoid overextending yourself. We consider this to be working outside of your financial means. An example would be keeping 5% of your property portfolios worth in liquidity.

You want to ensure that you have the financial stability and flexibility to weather any unexpected challenges that may arise.

#17 Keep detailed records of all expenses and income

This might not be the most exciting part of real estate investing, but…

It’s crucial for effective financial management and maximizing profitability.

We always aim to maintain accurate and organized records of all our property-related expenses.

This includes things like property taxes, insurance, maintenance costs, repairs, and renovations.

We keep track of every dollar spent on the property, which gives us a clear picture of our financial commitments.

It’s equally important to document your rental income, including rent payments, security deposits, and any other sources of income related to the properties.

#18 Use technology to streamline property management and financial management tasks

Adding on to the previous tip, you don’t have to keep all your receipts in a shoebox.

You can use Google Drive or any of the bookkeeping software available online like Dext for organizing receipts, and Xero or Quickbooks for bookkeeping and reconciliation.

Consider using a property management software like Buildium to handle various aspects of property management efficiently.

A property management software can assist with tasks like tenant screening, tenant communication, rent collection, maintenance requests, and lease management.

Automating processes and centralizing information in one place will save you a lot of time and effort in the long-run as the portfolio scales.

#19 Regularly inspect the property to ensure it’s well-maintained

We always like to have a systematic approach to property walk around inspections so we can catch any maintenance or repair needs early on.

So we plan ahead and create a schedule for routine inspections, taking into account lease renewal periods or changing seasons.

This is not to be underestimated. Be proactive by doing an outside walk around of the property once per month, and a inside walk around (ie. mechanical and smoke detector check) once per year.

However, this isn’t something you’d want to put on your own schedule if you’re looking to build a passive income stream from your real estate portfolio.

We recommend outsourcing the regular walk around to your local maintenance team to free up your time.

#20 Stay informed about the local rental market and adjust rent rates accordingly

By understanding the dynamics of the rental market, you can maximize your rental income and stay competitive in the ever-changing landscape.

So, how do you stay informed?

One way is to make it a habit to regularly research and monitor rental trends, vacancy rates, and comparable rental prices in your area to get a solid grasp of the market demand and make informed decisions.

What we do is we outsource this to virtual assistants who can stay on top of any market trends or changes and inform us in time.

#21 Make sure you have adequate insurance coverage for the property

Insurance protects the investment from unexpected risks, including damage caused by natural disasters like hurricanes or floods, fire incidents, vandalism, and even liability claims.

To ensure you have the right coverage, it’s important to carefully review and select insurance policies that suit your property’s specific needs.

We typically go to an insurance broker who has multiple insurance policy options, compared to going directly to an insurance company who will just sell their own policy to you.

#22 Consider purchasing properties with a partner to share costs and risks

Creative financing options can open doors to buying unlimited properties. Specifically, joint venturing will allow you to combine resources with another investor and tackle larger and more lucrative investment opportunities.

Pooling your capital allows you to access properties that might have been out of reach individually.

But it’s not just about the money.

Partnering with someone who has complementary skills or expertise can be a game-changer in terms of dividing responsibilities and streamlining operations.

#23 Avoid properties that are located in areas with high crime rates

This one should go without saying but…

Safety and security should always be a top priority when considering an investment property.

Properties in high-crime areas carry a lot of potential risks.

Vandalism, property damage, and concerns about tenant safety will affect the value of the investment and cause issues in the long run.

From our experience, it’s just not worth it.

#24 Make sure the property is properly zoned for rental use

Zoning regulations play a crucial role in determining how a property can be utilized.

It’s important to ensure that the property aligns with the intended use.

Before finalizing your purchase, verify with the local zoning authorities that the property is legally permitted for rental purposes.

This step helps you comply with local laws and regulations, avoiding any potential legal issues or penalties down the line.

It’s always better to be proactive and make sure you’re on the right side of the law.

#25 Make sure the property has adequate parking options for tenants

Parking is a significant factor for many renters, especially in areas where street parking is limited or the population is dense.

Having sufficient parking can make a big difference in tenant satisfaction and retention.

Offering convenient parking options can attract quality tenants and contribute to a positive rental experience.

#26 Keep your personal finances separate from your rental property finances

It’s a simple practice that can make a big difference in managing your finances effectively, maintaining accurate records, and staying on top of your obligations.

One way to do this is by opening separate bank accounts specifically for rental property activities.

This separation will make it easier for you to track income and expenses accurately, simplifying your bookkeeping process.

We always aim to maintain clear financial records for each property separately to avoid confusion or miscalculations in the long run.

#27 Have a plan in place for handling tenant complaints and disputes

The key to maintaining positive landlord-tenant relationships is resolving issues in a fair and timely manner.

To ensure a smooth process, it’s important to establish clear protocols and communication channels for tenants to voice their complaints or raise disputes.

Aim to create an open and welcoming environment where tenants feel comfortable expressing their concerns.

We typically have our property managers handle any complaints or disputes, including documenting the details of the issue, investigating it thoroughly, and taking proper action.

#28 Attend local real estate networking events to expand your network

We always encourage our members to connect with like-minded individuals, industry professionals, and potential partners or investors who can contribute to their success.

Real estate investing events are a great place to meet experienced investors, real estate agents, lenders, contractors, and other industry experts who can share valuable insights, advice, and potential investment opportunities.

Attending these events will expand your knowledge base, expose you to different perspectives and strategies, and help you stay informed about market trends and opportunities.

You know what they say… your network is your net worth.

#29 Keep your personal emotions out of the decision-making process when investing in real estate

Emotions can cloud judgment and lead to impulsive or biased choices that may not align with your investing goals.

When evaluating potential properties or making investment decisions, rely on objective analysis, financial data, and market research.

Be aware of common emotional biases that can influence decision-making, such as “falling in love” with a property or being influenced by others’ opinions.

Stay grounded and focus on the numbers and objective criteria that determine the property’s investment value.

#30 Look for properties with the potential to add value through renovations or upgrades

As part of the BRRRR investing strategy, we always look for slightly distressed properties that need some improvements.

Doing this allows you to create a gap between the purchase price and the after repair value so you can collect a refinance check later down the road.

Besides, adding value through strategic renovations will make your property more desirable to A level tenants.

#31 Don’t rush into a purchase without doing proper due diligence

Now, one of the most common mistakes newbie real estate investors make is that they jump on the first opportunity that comes their way.

This is closely related to tip #29 where we talked about keeping emotions out of the decision making process when investing in real estate.

The thrill of making that investment often leads investors to rush with their decisions.

Make sure to take a step back and do proper due diligence before pulling the trigger.

#32 Always have a plan in place for marketing and advertising vacancies

Minimizing vacancy periods and quickly finding quality tenants is crucial for maintaining a steady rental income and maximizing the profitability of your real estate investments.

It’s always good to have a system in place for advertising your properties to reduce vacancy rates.

We typically outsource this to our portfolio manager who is in charge of crafting compelling property descriptions that highlight key features and amenities.

They are also responsible for responding to inquiries and scheduling property viewings, as well as promptly following up with interested tenants.

#33 Invest in properties that offer good cash-on-cash returns

Cash-on-cash return is a metric that measures the annual cash flow generated by a property relative to the amount of cash invested in the property.

To calculate cash-on-cash return, divide the annual cash flow (income minus expenses) by the initial cash investment and express it as a percentage.

This metric provides a clear understanding of the return on your invested cash and allows you to compare different properties and investment opportunities.

#34 Invest in multi-family for maximum profitability

Having multiple units means that you have multiple tenants, which helps spread the risk of vacancies.

If one unit becomes vacant, you still have income coming in from the other units, reducing the impact on your overall cash flow.

This diversification can provide a more stable and consistent rental income compared to properties with a single unit.

#35 Have a detailed lease agreement in place to protect your rights as a landlord

The lease agreement is a legal contract that establishes the terms and conditions of the tenancy, providing clarity and protection for both you and your tenants.

It is a crucial document that sets the foundation for a smooth and mutually beneficial landlord-tenant relationship.

Make sure to have all your expectations in writing and consult with a legal professional who specializes in real estate law to craft this document.

Conclusion

After years of buying and renting real estate properties, we’ve found that every single step of the process can be broken down into repeatable systems.

So once you buy your first rental, it should be really easy to replicate the process and secure a high return on investment without making costly mistakes.

If you want access to our systems and processes that have allowed us to buy over $50 million in real estate, schedule a call by clicking the schedule button on the website and let’s talk.