The apartment rental industry in the United States has surpassed the purchase and leasing sector of the real estate industry. At the beginning of 2021 alone, the total revenue generated by the apartment industry reached a staggering high of USD 174.2 billion. It steadily grew by 5% each year since 2016 and is predicted to grow exponentially in this year and the years to come.
If you have land sitting vacant or a property that you are not using, you can turn it into an apartment rental, and here are some tips on how to do that:
Register Your Business Name
Say that you already have the location and the capital. What you need to do first is to register your business to make it a legal entity. Since this is an apartment rental property, you can consider registering it as a limited liability company or LLC. Businesses registered as LLC are regulated at the state level and the process for application differs based on which state you’re in. You can also check the website of the United States Small Business Administration for more detailed information about the requirements.
Under the LLC, the assets that are only at stake in case there is a lawsuit are your rental property and not your personal finances. If your future rental property is still under a mortgage, you should inform your lending company that you are going to transfer the title to the LLC. They may choose to end the loan or open a completely new one
Get a Residential Real Estate License
You need to get a residential real estate license in the state you’re in. This type of permit is often granted by the local department of revenue which takes care of all real estate licensing in your state. No matter where you are, part of the process is to enroll in a pre-licensing course from a legitimate real estate licensing academy.
The required total number of hours also varies depending on your location. In New York, the standard is 75 hours. It takes longer in Texas where the total required hours are at least 180. In California, you would be qualified as long as you’ve finished 135 hours of class. Prices may vary but the average cost of a single course starts at USD 350.
Find Vendors and Management
You would need a team behind you once you decide to open an apartment rental business. The first on your list should be a property management company that will serve as the point of contact between you and your clients.
You also need to contact providers that will set up utilities like, water, gas, internet, and electricity. Bear in mind that it is extremely important to obtain an Electrical Installation Condition Reports or EIRC certificate to prove that your apartment’s overall electrical system is up to code and safety standards. Last should be a maintenance and repair team who can come at a moment’s notice in case there is a problem or issue to be fixed in one of your units.
Market Your Rental Property
Proper marketing is the way for you to find potential renters. One of the easiest ways is to use social media like Facebook and Instagram to advertise your rentals. You can also tap into residential booking websites like Air BNB if you’re looking for short-time rental commitments. Make sure to use quality photos and statements that show why your rentals are the best in town. You can also research your competition and use it as a benchmark for your services.
Set the Price for Your Rental
Generally speaking, the rental cost should be between 0.8% and 1.1% of the property’s total value. One proven way to effectively create a sound price point is by using the sales comparison approach or SCA. By using the SCA, you will make a comparison of similar properties in the area over a certain period.
SCA may be affected by values like the number of bathrooms and bedrooms, size and availability of a garage, pools, fireplaces, and proximity near hospitals, schools, and supermarkets. These are the main deciding factors when it comes to rental prices and those that have the most values often have the highest rental costs.
You also need to take into consideration the risk factors like crime-rate in the area because it can negatively affect your business. If your rentals are located in places where there are safety issues, you would need to spend more on security.
In any type of business, having adequate knowledge about your chosen industry is often the key to success. Now that you have taken the first few steps, the next thing for you to do is to be patient and keep on advertising your rental properties.