When you purchase a rental property in Arizona, you’re doing more than just investing in real estate, you’re opening the door to run your rental property like a business.
Unlike other investment opportunities that earn an ROI while you sit back and relax, managing a rental property requires hands-on action to ensure the property is maintained and tenants are satisfied.
Unless you work with a property manager, owning a rental property isn’t necessarily passive income. It requires your attention and care.
Don’t let this discourage you, though! Investing in a rental property means you can run it like a business and further maximize your return on investment (ROI) through actionable and strategic steps.
So, it’s time to adopt an entrepreneurial mindset and learn how to run your rental property like a business.
Run Your Rental Property Like a Business
Your goal is to earn as much profit as possible from your real estate investment, right?
Running your rental property like a business gives you the flexibility you need to optimize processes, enhance your services, and maximize your ROI.
Write a Business Plan
If you’re going to treat your rental property like a business, then a business plan is essential. This document is an outline of how you’ll operate your rental property to make revenue.
You’ll want to list potential expenses, estimated revenue, services, and tools you’ll require to operate, and establish how much profit you can expect from this business plan.
Hire Reliable Helpers
Businesses require specialized employees. Your rental property is no different.
From contractors to painters to real estate lawyers to property managers, hiring reliable helpers and services to operate your rental property is one of the keys to earning more revenue.
One of the most profitable “employees” you can invest in is a full-scale property management company that will handle everything so you can turn your rental property into truly passive income.
Obtain Rental Licenses and Landlord Insurance
Before you can rent your property to tenants, there are some administrative tasks to do such as obtaining a rental license. Keeping your rental property compliant with local real estate laws and regulations is essential to avoid potential legal trouble.
You’ll also want to get landlord insurance for liability and to cover qualifying damages and expenses. Taking precautions for issues is one of the best things you can do when running your rental property like a business.
Enhance the Property Amenities
Investing in a rental property provides so much opportunity in your direct control to increase your profits. One way to do this is by enhancing your rental property’s amenities to increase the property value, which allows you to increase the rent price.
Some ways to do this are by upgrading property appliances, adding extra storage space, including a parking space, and installing air conditioning if central AC is not available.
Set Up Thorough Tenant Screening
You don’t want to rent your property to just anyone. You want to rent your property to a dependable and respectful tenant who will maintain your property and pay rent on time.
One way to ensure you rent your property to the right tenant is with a thorough tenant screening process. Use tools to complete background and credit score checks, ask for references, and interview the tenant before allowing them to sign a lease.
Write a Professional Lease Agreement
Your lease is one of the most important documents when managing a rental property. This agreement between the landlord and tenant sets the laws and boundaries for what is expected from both parties.
While there are plenty of lease templates available online, it’s recommended to work with a real estate attorney or professional, like a property manager, to write an air-tight legal lease agreement.
The lease will state terms such as how long it is valid for, how the tenant should cancel or renew, when rent is due and for how much, late rent penalties and fees, and much more.
This is a piece of paper that you want to have great consideration for as it will set the tone and rules for your tenant.
Set Up an LLC
Now, if you truly want to run your rental property like a business, you should set up a limited liability company (LLC). This separates your rental property and its revenue from the rest of your personal assets.
An LLC acts as a pass-through entity, meaning only the profit from the year will be taxed, which could save you thousands of dollars and increase your ROI.
Keep Detailed Financial Accounts
When operating a business, keeping accounting records and books is crucial. When it comes time to file taxes and deduct expense tax write-offs, these records will be extremely helpful.
However, keeping detailed financial accounts is also helpful when optimizing your rental property business. When you see exactly how much you’re spending on expenses and services regarding revenue, you can make data-driven and strategic decisions to cut back on expenses or increase rent to maximize your profit.
Evaluate and Assess Performance
Every six months to a year, it’s a good idea to evaluate and assess your rental property’s performance. This allows you to identify areas that you can improve to increase revenue and get the most out of your investment.
The longer you run your rental property like a business, the more you’ll learn about how to improve your operations and management.
Become a True Business Owner and Delegate the Work to a Property Management Company
When you look at the world’s top entrepreneurs, you don’t see them sitting behind computers all day long doing menial tasks that keep their businesses running. Instead, they delegate important tasks to highly qualified employees to make their dreams come true.
Landlords who want to run their rental property like a business can do exactly the same!
When you work with a reliable property management company like Stratton Vantage, you can hand off all of the day-to-day tasks involved in managing and maintaining your rental property.
We’ll take care of everything, including creating detailed monthly financial reports, tenant screening, and rent collection. So, you can sit back, relax, and cash your passive income checks while we work to maximize your ROI and profit!
Are you ready to start running your rental property like a business? Request a free rental analysis from Stratton Vantage to get started!