How to Make Money by Renting out your Own Property. Renting real estate brings 7-15% per annum, depending on the purpose of the premises. With proper organization of processes, management takes a minimum of time, and income becomes passive. We tell you how the sphere of hiring premises is arranged, what to look for and what risks to take into account.
Is the property rental business profitable?
Despite the crisis and the departure of Western companies, business is developing and expanding its area. Renting out real estate remains a promising area for several reasons.
First, renting premises can become passive income. If an entrepreneur has a couple of apartments or offices, management takes a minimum of time. But even when you own 10-15 objects, you can delegate management to hired employees or a real estate agency.
Secondly, the real estate market remains stable. In most regions, in the long term, apartments , offices, buildings become more expensive or retain their value. 34 REAL WAYS TO MAKE MONEY ONLINE ON THE FACT
Third, rent indexation is allowed to protect income from inflation and ensure a reasonable return on investment. The corresponding clause is included in the contract, which is concluded at the beginning of cooperation.
Which is better: short or long term rental
Commercial property owners are oriented towards long-term leases, as it is difficult to regularly find interested companies. Short-term rentals are considered by owners of studios for photo shoots or conference rooms.
Short-term rent is more profitable for apartments – the direction has a higher profitability, but it takes more time. The owner is constantly looking for clients, meets and escorts tenants, takes care of the cleanliness and tidiness of the property.
For example, a one-room apartment in the center of Yekaterinburg is rented for a long time for 30,000 rubles. per month, and daily – for 2.5 thousand rubles. Even if the apartment is rented for only 15 days (load – 50%), the entrepreneur will receive 37.5 thousand rubles.
How to make money renting out property
Finding a room
The task is to find an object that will interest tenants.
To assess the demand for commercial space:
- Visit the property and take photos.
- Post several ads on Avito, Cyan, Yulia and other sites.
- Communicate with potential customers, write down contacts, needs and fix the readiness to move into the premises in a few days.
- Collect information within 1-2 weeks. If ~ 40-50% of clients are ready to move on to a deal, the object in question is in demand among tenants.
Good apartments are taken in a few days, so investors do not have two weeks to test. Therefore, use a different algorithm:
- Save 20-30 listings of similar apartments in one area.
- Watch how quickly they are removed from publication.
- Analyze: if more than 15-20 ads are removed within 5-7 days, real estate in the area in question is in demand.
The first stage may take a couple of months. Take your time, profitability and payback depend on it.
Calculation of profitability
The task is to select the real estate option with the maximum profitability.
At the first stage, several options are selected. To make a final decision, calculate the potential profitability of objects:
Dg \u003d Revenue for the year / Object value x 100%
For example, Anatoly has three options . To calculate the potential return, he analyzed the average rental rates on popular classifieds sites:
- An apartment in the center with an area of 47 m 2 for 5 million rubles. If the apartment is rented for 15 days (load – 50%), monthly revenue – 44,000 rubles, annual income – 528 thousand rubles.
- Office area of 70 m 2 for 4.8 million rubles. rent for 40,000 rubles. per month, revenue for the year – 480 thousand rubles.
- Three-room apartment in a residential area with an area of 68 m 2 for 4.5 million rubles. can be rented for 37,000 rubles. per month, then for the year the entrepreneur will receive 444 thousand rubles.
Profitability of objects:
- Dg1 \u003d 528,000 / 5,000,000 x 100% \u003d 10.6%.
- Dg2 \u003d 480,000 / 4,800,000 x 100% \u003d 10%.
- Dg3 = 444,000 / 4,500,000 x 100% = 9.9%.
Daily rent of an apartment in the center will bring maximum profitability. But if an entrepreneur does not want to spend a lot of time on management, he will stop at an office space.
The task is to make sure the object is legally clean.
- To minimize legal risks:
- Request a document that confirms the emergence of rights to the object – a contract of sale, donation, privatization, etc.
- Order an extract from the USRN at the MFC or on the Roscadastre website .
- Check the seller: the authenticity of the passport, the presence of an individual entrepreneur or LLC. If the owner is a company, collect information about the legal entity on the website of the Federal Tax Service.
- Make sure the owner is not going through bankruptcy proceedings.
- Check online databases of courts so that real estate is not the subject of disputes.
- Check the cadastral number and location on the public map of Rosreestr.
- Get the consent of the spouse, other owners, or the approval of the founders.
If the object is being sold under a notarized power of attorney, verify the authenticity of the document on the website of the Federal Notary Chamber (FNP).
If there are no encumbrances, the object is legally clean, proceed to the deal. Use the services of qualified professionals who will prepare the contract and carry out the transaction. This minimizes the likelihood of fraud and theft of money.
Search for clients
The task is to find adequate clients who will keep the object and not violate obligations.
To find customers, they place ads for renting real estate on Avito, Tsian and other sites. For short-term employment, they use booking services: Ostrovok, Sutochno.ru, Travelata and others.
Investors with multiple properties connect alternative sources to accumulate a base of potential clients:
- contextual advertising — send traffic to a landing page or website with a description and photos of the premises;
- social networks are relevant for daily rent of apartments. Accounts with useful and interesting posts form a community that will be interested in the investor’s proposals;
- SEO – blog posts are published for the target audience, following the rules of search engine optimization. For example, how to properly check an apartment before renting, what criteria to evaluate offices, etc.
Active promotion protects against downtime – periods when the premises are not occupied by tenants. Long downtimes lead to losses and reduce the payback period of investments.
Conclusion of the lease agreement
The task is to prepare a competent agreement that will protect the rights and interests.
The relationship with the tenant can be drawn up in a free form and individual points can be added. For example, permission for full or partial sublease.
- Residential lease agreement
- Lease agreement for non-residential premises
If the agreement is concluded for a period of 12 months or more, one of the parties registers the document with Rosreestr. We talked about the procedure in more detail in a separate article .
Finance: expenses and income
The initial expenses of investors are associated with the purchase and preparation of real estate for operation. Consider the example of a one-room apartment in the center of Yekaterinburg:
- purchase – 5 million rubles.
- cosmetic repairs – 150 thousand rubles.
- furniture – 70 thousand rubles.
- household appliances – 50 thousand rubles.
The list and amount of costs vary depending on the state of the object. For example, in a 30-year-old house, repairs will require more money than in a new building.
Fixed costs depend on the contract. Most owners take on the payment of utility bills, leaving water and electricity to the tenants according to the meters. Periodically, there is a need for minor repairs, replacement of household appliances, etc.
Income depends on the type of premises, chosen direction, city and district. In the center of Yekaterinburg, one-room apartments are rented for 30-35 thousand rubles.
Net income is the difference between rent and fixed costs. In our example, the investor will receive 360 thousand rubles per year. From this amount, he will pay taxes, cover minor operating expenses and periodic repairs.
Rental business risks
- Simple . If you make a mistake in the analysis of demand, the payback will increase several times. Most of the time will have to be spent on finding customers, and the income will not meet expectations.
- Problems with tenants . Often clients damage property, damage facilities, or stop paying. Therefore, it is important to check tenants, especially legal entities.
- Long payback . Investments in commercial real estate pay off in 8-12 years, in residential – in 13-17. During this time, force majeure may occur: the building will become unusable, the environment in the city will deteriorate, an outflow of population and economic decline will begin.
- In 2023, the rental business remains relevant: real estate generates income and protects capital from inflation.
- Short term rentals maximize profits but are time consuming. Long-term relationships have lower profitability, but they require a minimum of attention and effort.
- Profitability and payback period depend on the demand for the premises. Demand analysis is an important preparatory step.
- Before concluding a transaction, the property is checked for legal purity and the absence of encumbrances.
- If the lease period exceeds 12 months, the contract is registered with Rosreestr.
- Profitability depends on the type of property, direction of rent, city, district and other factors.