How to invest in rental homes for beginners

Investing is the activity of sacrificing present resources for future profits. Therefore, investing is not just buying financial assets such as stocks, mutual funds, but also managing assets.

real estate investment There are many forms. From renting vacant land to make a parking lot to renting an empty house for rent. The advantages of property investment is the potential profit from a steady increase in prices. there is potential cash flow stable and can be passed on to offspring

The downside is investing in real estate. It is often costly both in terms of capital and operating expenses. (depending on type) long payback period high risk limited liquidity And the size of the price really depends on the location. Therefore, before investing in real estate, you must think thoroughly. If you want to start investing in rental homes Here are some investment advice you should try and tips:

1. Determine the rental location

It doesn’t just affect the size of the price. The location of the rental house also directly affects the design of the house to be built. Therefore, when inspecting the construction site Make sure you know the size of the land to build and estimate who your business goals are.

This potential goal will later influence the design. For example, rentals designed specifically for college students tend to have a different design compared to rentals for small families.

2. Determine the design.

There are many types of rental houses that you need to know. The design of this house plays with the number and size of different components of the house, such as the number and size of bedrooms, living rooms, bathrooms, or garages.

A simple house with 1 bedroom, 1 bathroom, kitchen and 1 car garage, commonly called a pavilion. Rental houses with pavilions are generally only suitable for small families or students.

On the other hand, larger homes with multiple bathrooms and bedrooms are often suitable for large families or offices. The price of a rental house like this is definitely different from a house like a pavilion. A fully furnished large house is definitely more expensive than a large empty house.

Therefore, determine the facilities and design of your rental home based on the size of land that will be used and the target market share. This is because each consumer or target market has different payment abilities and housing needs.

3. Set the price

One disadvantage of real estate investing is the relatively long Payback Period (BEP). It usually requires large amounts of capital and less liquidity.

However, you cannot arbitrarily increase prices to accelerate the BEP period, as rising asset prices often make it difficult to sell these assets.

Pricing for renting a rental home must be careful. There are several factors that you must take into account to determine this variable, including:

• target market.
• Facilities offered
• desired profit
• Other rental home prices around you
• operating expenses (If you have multiple facilities to bear)
• The BEP Capital and Goals You Need

You can get information from various factors. You can get the above from yourself and by checking the prices of other rental properties around your rental location. To make this price calculation easier You can use the following formula:

Rent price = Cost to build or buy a house x Capitalization Rate

The capitalization rate for rental housing is generally 3%-5% per annum, which means that If the cost of building your rental house is IDR 500,000,000, the rental price will be around IDR 15,000,000-IDR 25,000,000 per year (3%-5% of IDR 500,000,000).

4. Set rules

Another challenge with real estate investing is the possibility of property being used in ways that violate norms or make the environment feel uncomfortable. The main way you can prevent this from happening is to set the rules that apply and make sure tenants know and follow them.

These rules, for example, are not allowed to crowd after hours. to maintain the norm of politeness Do not bring the opposite sex into the room. (For rented students) do not bring drugs, etc.

To make sure tenants know and follow these rules. You can create a rental agreement that they have to sign. In addition to regulations Make sure this agreement letter contains the penalties that will apply if they are not followed. with this letter Both you and the tenant will have written proof if something unpleasant happens.

Although it indirectly narrows your business market share. But the presence of these regulations can reduce the risk of unwanted things happening to your property.

5. Marketing

Marketing is an important aspect of rental home investing and real estate investing in general. The more your rental property is at risk of not being sold. Especially if the house is not located on the road. Here are some rental home marketing channels you should try:

• word of mouth through your neighbors or relatives
• Using a real estate agent affiliated with an official real estate company
• by using real estate agents who have channels to Marketplace for buying and selling homes.
• Marketing a rental house through an independent home buying-selling application (no agent needed)
• Posting signs to announce houses for rent along the fence and at various strategic points.
• Social media use, such as Insta Ads, paid at home marketing on certain Instagram accounts, Facebook Marketplace, etc.

Another trick to marketing your rental home to sell quickly is to offer rentals with a low down payment and offer monthly installment payments. Especially to attract consumers from the student group who often need more people to meet the room quota in the house. and reduce the annual rent

However, the monthly rental price must be higher than the annual rental price. For example, the annual rental price is IDR 15,000,000, so the monthly rental price could be IDR 1,500,000. Price becomes IDR 18,000,000

Also, be sure to clean and maintain your rental property regularly. A clean and well maintained home has its own selling points in the eyes of potential tenants. This is because potential tenants would rather rent a house that looks clean and well-maintained than one that looks dirty.

Home or shelter is a basic human need. With the increasing number of people in the world and limited land available. especially in urban areas It is therefore not surprising that investing in rental homes is quite tempting.