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Having a rental property with existing tenants can make the process of selling that property even more complicated. You’ll have to advertise the property and conduct showings while being mindful of the rights and needs of your tenants.
In this article, we explain what happens when a property is sold and share five tips for selling a property with existing tenants.
Can You Sell a Rental Property With Tenants?
As a landlord, you can sell a rental property with tenants living there if you don’t violate your existing lease agreement or your tenant’s rights. It’s important to remember that you’ll need to handle the sale of the property in a way that is fair to your tenants. Before selling your property, here are some pros and cons to consider.
Pros of Selling a Tenant-Occupied Property
- Attractive to investors: A property with existing tenants is a big selling point for someone looking for an investment property. Already having tenants means that the new owner won’t need to advertise the rental or wait to start generating income.
- Already staged: Tenants living in your property are likely to have the property furnished. This helps potential buyers see what the property could look like while it’s being lived in, and may make the home more desirable.
Cons of Selling a Tenant-Occupied Property
- Unhappy tenants: If your tenant isn’t thrilled about the prospect of a new landlord, it may make certain parts of the process difficult, such as scheduling showings.
- Poorly maintained property: If it’s been a while since you’ve done a rental property inspection, you may find the property in a less-than-ideal condition. This can make advertising the property difficult, and leave a negative impression on potential buyers.
What Happens to an Existing Lease When the Property Is Sold?
When a rental property with tenants is sold, the existing lease is transferred to the new owner. The lease terms, including the rent amount and duration of the tenancy, remain the same unless the new owner and tenants agree to make changes. The new owner is bound by the existing lease terms and cannot ask the tenant to vacate the property or increase the rent until the lease is up for renewal.
However, if the existing tenants have decided to move out instead of staying, you can create a lease amendment to modify the lease termination date. A lease amendment is a legal document between the landlord and tenant that can modify the terms of an active lease agreement.
To create one, you can use platforms like Avail that offer free lawyer-written lease amendment templates. All you need to provide is the tenant’s name, the effective date, the part of the lease being amended, and signatures from all parties.
The document will then be emailed to your tenants to download, sign, and return for your counter signature. The amendment will be legally-binding once everyone has signed.
How to Sell an Occupied Rental Property
If you’re selling a rental property with existing tenants, here are some tips that can help ensure a smooth selling process.
1. Be Transparent With the Buyer
Being upfront with potential buyers can improve the chances of a successful sale. Clearly state in your listing description that the property is tenant-occupied so that interested buyers are aware.
Prioritize sharing the details of any existing lease agreements and management processes (such as the rental property management software you use) to transition everything smoothly.
2. Communicate With Your Tenants
Communicate your plans with your tenants as early as possible to give them time to make a decision on what they want to do. Let them know you plan on selling the property and what to generally expect from the process.
Any prospective buyers can also help keep your tenants informed once they’ve officially purchased the property. They can send a landlord introduction letter to introduce themself, share contact information, and list out any changes they plan to implement.
3. Make Showing Times Convenient
Tenants need at least 24 hours (or more, depending on local landlord-tenant laws regarding notice of entry) for showings. This advanced notice also gives them time to prepare the property, which may help make a stronger impression on a buyer.
When you schedule a showing, be considerate of your tenant’s schedule as well. For example, if you know that your tenant works from home three days a week, avoid setting up tours during those days.
4. Make Sure the Property Is in Good Condition
The condition of your property can greatly affect the outcome of your sale. If too much maintenance has been left unaddressed or there’s an excess of property damage, a buyer may change their mind.
An easy way to keep the property in good condition is by hiring professional services for tasks like landscaping and interior cleaning. These services can also be more reliable and consistent than enlisting your tenants’ help.
5. Ensure There Are No Lease Violations
If your tenant is staying after you sell the property, make sure any lease violations are resolved before your sale is finalized. This includes collecting any overdue rent payments since a delinquent tenant can affect the outcome of your sale.
Where to List a Rental Property With Existing Tenants for Sale
When you’re ready to list your rental property, you can visit a real estate listing site to find potential buyers like Realtor.com®. Through their platform, you can find prospective buyers and include important information like property type, available features, the history of the property, and more.
Realtor.com® also offers other tools like Seller’s Marketplace to help you sell your property without listing it, or find a qualified real estate agent in your area to help your sale with UpNest.
And, when your potential buyer is ready to find a new tenant for the property, they can easily post a rental listing on Realtor.com®.
Create Lawyer-Reviewed Lease Documents With Avail
Avail is a free property management software that helps landlords simplify. Create lease documents that adhere to the local landlord-tenant laws of your state, and include additional clauses or amend your lease if you’re planning on selling your tenant-occupied rental property.
Log in or create an account to get started today, and visit our Resources page for rental form templates, educational articles, guides, and more.
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Single-family homes often serve as primary residences, but more and more landlords are renting out their houses to keep properties they’re not ready to sell. This can also be a great way to generate passive income with a property you already own, as opposed to buying an additional property to rent out.
Keep reading to learn more about single-family rentals and what tools can help you manage your rental properties like a pro.
What Is a Single-Family Home?
Single-family homes can be a detached home that doesn’t share any walls with another residence or attached dwelling that are separated by a ground-to-roof wall. The property owner typically owns the entire property and the land, while those with condominiums (or condos) only own the interior of an individual unit and share common areas with other members of the association.
Single-family homes also don’t share utilities with others and are responsible for all costs associated with the property.
The Pros and Cons of Single-Family Rentals
With more tenants preferring single-family homes to traditional apartments, it’s easy to see the value they provide to landlords. But before renting it out to tenants, here are the pros and cons to be aware of.
Pros of Single-Family Rentals
- More space: With rising rent prices, more tenants are willing to sacrifice location and popular amenities for more affordable options that offer space. The amount of space single-family homes offer can increase your chances of filling vacant properties faster, especially with a competitive rent price.
- More privacy: Single-family rentals offer tenants more privacy and remove the chance of dealing with other tenants.
- Fewer rules: Most rentals in multifamily properties can have additional rules tenants must follow outside the landlord’s rules. Renting out a single-family home gives landlords more flexibility on deciding what is (and isn’t) allowed.
Cons of Single-Family Rentals
- Higher purchase price: If you don’t currently own a single-family home, you may have to pay a higher purchase price, down payment, and closing costs than with a condo.
- More financial responsibility: Since a single-family home is considered a stand-alone property, the owner handles all financial obligations. Examples of costs to cover are property taxes, homeowners association (HOA) fees (if applicable), utilities, maintenance, home improvements, and so on.
- The sole responsibility for maintenance: With a single-family home, you cannot rely on on-site staff to help tenants with maintenance requests. You will be responsible for finding and hiring contractors to help with other maintenance, which can add to operating costs.
Are Single-Family Homes a Good Rental Investment?
Single-family homes can be a great rental investment when priced fairly and competitively. Renting out a single-family home is also ideal if you’re planning to move out of your primary residence but want to keep the property instead of selling.
But with any investment, analyze a property’s profitability to determine if you can generate a profit each month before committing to renting it out. To do this, you can look at important factors such as the neighborhood, property taxes, average rents, and property history before finding tenants.
Are Single-Family Homes Better Investments Than Multifamily?
While it’s true that both single-family homes and multifamily properties offer a great return on investment (ROI), determining which option is best for you depends on several factors.
- Local rental demand: Cities can vary on rental demand and the type of rentals tenants are looking for. Some areas may have a higher demand for condos and apartments in multifamily properties, while others prefer single-family homes like detached houses or townhouses.
- Rent price: Generally, you can charge more for rentals in high-rise to mid-rise buildings since they offer additional amenities that increase the property value. On the other hand, single-family homes tend to have a more affordable price that can make it easier to attract tenants in your area looking to save on rent.
- Vacancy rates: Depending on rental demand, there’s a chance one type of property can require more time to fill than another. If you find other landlords needing more time to fill a single-family home than a condo in a multifamily home, this is something to consider when determining which type of property to rent.
Looking at multiple properties to buy? Use the Avail Rental Property Calculator to see how profitable each property can be for free.
Do You Need to Hire a Property Manager to Manage a Single-Family Home?
You can hire a property manager to help manage your property for you or use a property management software platform to streamline the process for less money. Property managers can charge anywhere from 8% to 12% of the monthly rent price, not including additional fees they may charge for one-off tasks.
On the other hand, property management software platforms like Avail make it easy to perform the following tasks:
- Advertising your rental
- Screen prospective tenants with rental applications and screening reports
- Collect rent payments, security deposits, move-in fees, and late fees
- Create lease agreements and lease amendments
- Manage property accounting
- Handle maintenance requests
You can do multiple property management tasks on one platform to keep everything organized. Simply create an account, set up your rental properties, and invite your tenants to Avail.
Where to Find Single-Family Homes to Buy
With so many house hunting websites apps, you may wonder which is best for finding available single-family homes. Some options to explore are Realtor.com®, Zillow, Homefinder.com, Redfin, Trulia, Homes.com, Estately, and ForSaleByOwner.com.
Each option offers up-to-date listings and filtering options to help you find properties that fit your criteria.
Once you’ve found a property you’re interested in, you can invest in an Avail Rent Analysis report to learn more about the rental demand in your area, get rental comps for similar properties, get a rental trends summary, and more.
You can use this report to determine which property offers the best ROI and can help you generate passive income through your rental property.
Manage Your Rentals With Avail
To help you save time and money as a landlord, you can use Avail landlord software to handle the various rental tasks related to your single-family rental. Whether you need to collect rent payments or screen prospective tenants, Avail offers various tools and resources to help you rent like a pro.
Create an account or log in today to get started.
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Amidst challenges like increased prices and mortgage rates, those in search of homeownership are turning to areas outside of high-priced metropolitan areas. For landlords, recognizing these hot zip codes could provide valuable insight as to where to invest in your next rental property.
Realtor.com® has put together a list of areas currently favored in the real estate market. Using Realtor.com® housing market data, these are the hottest zip codes for rental property investment in 2022:
1. Brighton, NY
Located in the Rochester metropolitan area, Brighton offers a dense suburban feel to its residents. An abundance of bars, restaurants, and coffee shops make the area appealing for young professionals, while highly-rated schools are a major draw for families. The proximity to Rochester also makes it easy to find a way to spend the weekend on Lake Ontario.
In addition to the several draws of Brighton, the median listing price is more than 40% below the national average in July, making it a compelling location for investors to explore. But don’t wait — properties stay on the market for an average of six days before selling, so you’ll want to be quick to claim your next rental in this area.
- Zip code: 14618
- Metro Area: Rochester, NY
- Average purchase price: $275,000
- Average time on market: 6 days
2. Nashua, NH
Proximity to beaches, lakes, and mountains, a thriving downtown, and renowned schools make Nashua a popular choice to call home. Located 35 miles northwest of Boston, this city is a viable place to live for commuters — particularly those who don’t need to be in the office every day.
This city has garnered a lot of attention, and while there’s been a 27% increase in the median listing price reported by Realtor.com®, this growth reflects the interest in the area. More than one-third of shoppers from out of the area look for residences in Nashua.
- Zip code: 03062
- Metro Area: Manchester-Nashua, NH
- Average purchase price: $536,000
- Average time on market: 7 days
3. Worthington, OH
Situated north of Ohio’s state capital, Worthington, OH, is a small town that will give your renters the sparse suburban feel they seek. Meanwhile, landlords will also find plenty of value in investing in a rental property here.
The median listing price is $467,000, but prices start at around $250,000. The large selection of single-family homes makes Worthington an excellent place for new and established families, and downtown Columbus is only a 20-minute drive if a change of scenery is needed.
- Zip code: 43085
- Metro Area: Columbus, OH
- Average purchase price: $467,000
- Average time on market: 7 days
4. Derry, NH
Derry is a location for those seeking a community that feels more rural. Realtor.com® highlights listings situated along the edge of Beaver Lake, as well as options located in thick forests with plenty of space from neighbors. The average rental cost is also notable at $2,995.
The downtown area is appealing as well, and residents can enjoy the quaint, walkable environment with restaurants, breweries, a history museum, and more.
Properties in this area have been getting more than three times the average views, and also sell relatively quickly. Keep this in mind when searching for a rental investment in this zip code.
- Zip code: 03038
- Metro Area: Boston-Cambridge-Newton, MA-NH
- Average purchase price: $447,000
- Average time on market: 7 days
5. Windham, ME
With New England zip codes surging in popularity, Windham is not an area to be overlooked. Its location on Sebago Lake offers plenty of waterfront activities while other popular activities like hiking and antique shops are also easy to find.
This smaller town of about 18,000 offers a unique experience, and the abundant single-family homes average 1,920 square feet of living space. Despite recent price increases, the homes in Windham are, on average, less expensive than other options in the surrounding metro area.
- Zip code: 04062
- Metro Area: Portland-South Portland, ME
- Average purchase price: $505,000
- Average time on market: 10 days
6. Bethlehem, PA
Based on Realtor.com® data, Bethlehem has seen the greatest increase in median home prices since 2021 — more than 50%. The 18017 zip code is made up of suburbs on the northeast edge of town and large single-family homes that average approximately 2,700 square feet of living space.
If the rolling hills and stone bridges of the area aren’t enough of a draw, another advantage of this zip code is the proximity to New York City — approximately 90 minutes away — and Philadelphia, which is only about an hour’s drive from this area.
- Zip code: 18017
- Metro Area: Allentown-Bethlehem et al, PA-NJ
- Average purchase price: $424,000
- Average time on market: 8 days
7. Johnson City, TN
Johnson City stands out from other zip codes on this list. It’s not in the Northeast, nor is it within reasonable commuting distance to a large city. Despite this, the area has become a more affordable alternative to Asheville, NC, approximately an hour south.
In addition to the rivers, lakes, mountains, and outdoor lifestyle that the area offers, Johnson City also offers its residents a drastically lower price compared to major cities like Nashville and Knoxville. This benefit makes investing in this region a worthwhile option.
- Zip code: 37604
- Metro Area: Johnson City, TN
- Average purchase price: $329,000
- Average time on market: 10 days
8. Hooksett, NH
Another sparse suburban neighborhood, Hooksett is conveniently located about 20 minutes south of New Hampshire’s state capital, Concord. What sets this area apart from other New Hampshire hotspots is the privacy and seclusion it provides. There’s no definite downtown area, but that likely won’t be missed by those who prefer a larger home and more space to themselves.
Residences in Hooksett average around 2,200 square feet, so there are plenty of large single-family homes to invest in. And with attention coming from Boston and its surrounding area, there are plenty of opportunities to see the return on a rental investment.
- Zip code: 03106
- Metro Area: Concord, NH
- Average purchase price: $482,000
- Average time on market: 10 days
9. North Attleboro, MA
With parts of the area dating back as far as the late 17th century, North Attleboro has seen a revitalization in the past several years. This suburb of the larger Providence, RI, metro area offers a rich history while redevelopment projects breathe new life into the downtown area.
While this zip code boasts the highest average price of $587,000, the homes here sell faster than any other area on the list. Single-family homes are abundant, but mixed-use multifamily housing options are also appearing and may attract even more prospective residents looking for a place to rent.
- Zip code: 02760
- Metro Area: Providence-Warwick, RI-MA
- Average purchase price: $587,000
- Average time on market: 5 days
10. Auburn, ME
Located on the west side of the Androscoggin River, Auburn is an area favored for an abundance of outdoor options. Residents can wander the trails of Mount Apatite, enjoy time at a local ski resort, or spend time on the water at the river walk.
Auburn is a smaller town but also boasts the smallest median home prices on the list – 40% lower than the national average according to Realtor.com® data. Current listings average 1,600 square feet but could be ideal for those who would rather be outside than in.
The attention on Auburn comes from the pricier Portland area, as well as Boston, so it’s likely that landlords won’t have to worry about their properties not garnering attention.
- Zip code: 04210
- Metro Area: Lewiston-Auburn, ME
- Average purchase price: $267,000
- Average time on market: 12 days
Methodology: Realtor.com® analyzed listings data on over 29,000 ZIP codes to determine its Hottest ZIP Code rankings, which are based on January-June 2022 averages of: 1) demand, as measured by unique viewers per property on Realtor.com®; 2) the pace of the market as measured by the number of days a listing remains active on Realtor.com®; limited to one ZIP Code per metropolitan area and ZIP Codes with at least 15 active listings each month. Time frames for metrics not factored into the ranking as noted, e.g. listing price trends based on June 2022 data.
Note: The markets where Realtor.com®’s “Hot Market Insights” are featured on listings and neighborhoods on its website may vary from the 2022 Hottest ZIP Codes, due to methodology differences such as time frames (monthly data updated each month vs. Jan.-June 2022 data).
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Buying a rental property is a great way to generate passive income, qualify for tax advantages, establish home equity, and more. But to generate income, your rental property needs to provide a good return on investment (ROI) or you may find yourself investing too much money with little to no reward.
There are different ways to calculate ROI for your rental property, so it’s important to determine which calculation makes the most sense for your rental. We outline how to calculate ROI on a rental property and better understand what factors can influence a rental property’s profitability.
What Is ROI on a Rental Property?
Return on investment is a percentage that measures the profitability of your rental property based on how much income it generates versus the costs to maintain. Different factors can affect ROI, such as the property type, how much rental income you make, the total operating expenses, and mortgage details.
It’s advised to calculate ROI throughout the year to better understand the performance of the property in terms of profitability. If you find that your rental is gradually declining in profits, then it’s important to understand which factors are impacting performance. This could be due to charging too little in rent or spending too much in operating expenses for a specific rental.
How Can I Calculate ROI on My Rental Property?
There are three methods to calculate ROI: the simple ROI calculation, capitalization rate (or cap rate), and cash-on-cash return. The initial amount of money borrowed and financing method to purchase an investment property will influence the type of calculation you’ll want to use to calculate ROI. For example, the cash-on-cash return calculation can be used when a mortgage or other loan was used to purchase the property, while the cap formula may be helpful for properties paid in cash.
For rental properties, ROI is typically calculated by subtracting your annual rental income from annual operating costs. Divide that number by the mortgage value (or how much still needs to be paid on the loan) to calculate ROI.
ROI = (Annual Rental Income – Annual Operating Costs) / Mortgage Value
This is a simple calculation that can provide an estimate of your investment gains and losses (if any). Other formulas you can use include cap rate, which looks like the following:
Cap Rate = Net Operating Income / Purchase Price × 100%
The formula for cash-on-cash return is as follows:
Cash-on-Cash Return = (Annual Cash Flow / Total Cash Invested) × 100%
There are different methods to calculate ROI, so it’s important to determine which method makes the most sense for your rental. If you prefer to use a financial calculator, you can use the Avail Rental Property Calculator to get cap rate, cash-on-cash return, and more financial outputs on your rental property. The results of the rental can be exported into a spreadsheet to further customize or reference in the future.
What Is a Good Rate of Return on a Rental Property?
A good rate of return on a rental property will vary depending on where the rental property is located, how much you charge in rent, the cost to manage your rental, and your financing method to purchase the rental.
A good ROI also depends on the goals for your rental business, which is something you’ll need to determine. However, most investors aim to have an ROI that is at or above 10%.
Manage Your Rental With Avail
The goal of managing rentals is to generate passive income, which is why it’s important to know how to calculate ROI for your property. You can manually calculate the ROI percentage per property or use the Avail Rental Property Calculator to provide all the numbers you need to see how profitable your rental is.
Create an account to help you manage your rental properties, collect rental fees, handle rental property accounting, and track maintenance requests — all in one place.
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Investment properties can be a lucrative source of passive income, but factors like profitability, maintenance, and the housing market at large can become good reasons to sell a rental property.
According to Avail data, roughly 16% of landlords reported plans to sell an investment property in 2022. If you’re wondering whether to sell your property or when to sell it, here’s what to know about selling a rental property.
How Do I Know if I Should Sell My Rental Property?
Determining whether to sell or keep renting your property depends on a variety of factors, but these are a few indicators that it may be time to consider selling:
- Profitability: Ideally, your rental property should bring in more money than you’re spending to maintain it. If the rental income you’re generating isn’t higher than the cost of your annual operating expenses, the profits (or lack thereof) may not be enough to justify holding on to the property.
- Maintenance: Maintenance is an unavoidable part of owning a property, but it can be time consuming. If the time and money spent on rental property maintenance becomes overwhelming, it may be time to consider hiring a property manager or selling.
- Tenant turnover: High tenant turnover can be the result of many things — the rental market, the property itself, or even your style as a landlord. But high tenant turnover means spending time and money advertising your property and losing rental income due to vacancy, which can become unprofitable over time.
- Property finances: Financial factors like property appreciation, capital gains from selling a rental property, and new investment opportunities should be considered, too. If your rental property is worth a lot more now than when you bought it or you’ve identified an even better investment opportunity, it could make sense to sell. Note that it’s important to be aware of any capital gains taxes from a sale and how to defer them with a 1031 exchange.
- Housing market: The current housing market can dictate how much you can charge for rent, how high tenant turnover is, and how valuable your property would be if you were to sell. In highly competitive housing markets, landlords may be more incentivized to sell a property.
- Location: If you’re moving away from your rental properties, you can always try long-distance real estate investing. But since this often means hiring a property manager, some landlords opt to sell their rentals, instead.
When Is the Best Time of Year to Sell a Rental Property?
Based on Realtor.com® data, the week of April 10-16 is the best time of year to list a home for sale in 2022. Why? According to seasonal data from 2018, 2019, and 2021, this week in April has the most favorable conditions for home sellers when looking at factors like competition, listing prices, days on market, likelihood of price reductions, and homebuyer demand.
Compared to other weeks in the year, Realtor.com®’s historical data from April 10-16 showed higher-than-average listing prices, more buyers looking at listings, homes selling more quickly due to higher demand, and even a lower level of competition from other sellers.
What To Do Before Selling a Rental Property
Before you list your rental property on the market, a few things need to be handled:
- Notify your tenants: You’ll need to give tenants appropriate notice that you’re selling the property. The amount of notice often depends on your lease and local laws, but can also dictate your timing for listing the property. In some cases, tenants will need to leave the property, but in others, a new owner will take over the rental lease.
- Prepare the property: Once you notify tenants of the sale, you’ll need to prepare the property for sale. This consists of a property inspection — regardless of whether tenants are staying or leaving — to identify any wear and tear or damage and address any needed repairs. If tenants have moved out of the property, it may be a good time to tackle property renovations that will help increase the value of the rental.
- Research home value: Doing some research on your property’s value is essential, even before working with an agent. Tools like Realtor.com®’s My Home give a breakdown on a property’s value, local market trends, and how your property compares to those currently for sale.
- Work with an agent: You can sell a property on your own, but most sellers choose to work with a real estate professional to make the selling process a lot smoother. An agent will be able to help you prepare the necessary paperwork, get your property in front of buyers through a multiple listing service, and assist with the entire home-selling process.
- Time your sale: To avoid being hit with short-term capital gains tax, it’s commonly advised to hold on to a rental property for at least one year. In some cases, you’ll want to wait until a lease has expired or allow time to complete renovations. An agent can help you make decisions about when to list your property on the market, or you can use market trends and research — like those provided by Realtor.com® — to help determine an optimal time to list.
Resources for Selling a Rental Property
To ensure you’re well-organized as you head into the selling process, use a move-out inspection checklist to note any necessary repairs for your rental and provide your tenants with a security deposit return letter to document any funds taken from their deposit upon lease termination.
When you’re ready to sell your rental property, Realtor.com®’s home selling resources can help you track your property’s value and match you with a trusted real estate professional to guide you through the home selling process.
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The concept of full-time real estate investing was sparked for Kendra Barnes during a game of Cashflow — a board game that uses components from real estate investing to teach you how to build wealth. After that game, she bought her first investment property, quit her government job in Washington, D.C., bought more investment properties, and founded The Key Resource to help other beginning investors carve their own paths.
We spoke with Kendra about how she made a profitable career out of real estate investing, what she’s learned along the way, and how the industry has been changed by COVID and a new wave of investors.
How Did You Transition From a 9-to-5 Job to a Full-Time Real Estate Investor?
“We never imagined investing in real estate,” recalls Barnes, who owned a house in Washington, D.C. with her husband and worked as an international economist for the U.S. government. “It wasn’t that we didn’t think we could do it, but we had literally never thought about it.”
The board game Cashflow opened up the idea of passive income for Barnes — and made her realize working a nine-to-five job until retirement age wasn’t the only option. She and her husband played the game on a Saturday night, and by Monday, they were already looking at investment properties.
Because they didn’t have enough money for the down payment on the D.C. property they wanted, they took a loan out from their retirement funds (Barnes recommends consulting a financial advisor before taking similar steps).
Once Barnes started seeing a return on their first investment property, she and her husband were eager to buy another — which they did through house hacking, or living in one unit of the multi-family property they had purchased while renting out the other three units.
“We started using money from one rental to fund the next,” said Barnes. “People ask me all the time how many rental properties they need to retire or be financially free, but there is no magic number. It depends on where you’re at and the financial goals of each individual investor.”
Pro Tip: There are different types of real estate investments, so it’s important to determine which is best for you.
What Were the Biggest Challenges You Faced When Starting Out in Real Estate?
“Lack of knowledge, followed by lack of funding,” said Barnes, which was part of the reason she wanted to bridge the gap in knowledge and share what she had learned (and the mistakes she made) in her own investing journey.
“One of my friends jokingly said, ‘Did you have to rob a bank?’” Barnes recalls after sharing the news of her newly-purchased four-unit building on Facebook. “I realized there was a gap in information. People wanted to do this, but they really didn’t understand how to start.”
Barnes notes that buy-in from family and friends can also be a major obstacle, especially if investing in real estate isn’t common within a social circle.
“In the Black community, conversations about wealth, in my mind, were lacking,” said Barnes. “We weren’t talking about it in our families, we weren’t talking about it among our friend groups, and I know people often need to see themselves represented in a story. So I started the Key Resource to bridge that gap and be the representation that I wish I had when I started.”
Have You Seen a Shift in the Kind of Investors That Are Getting Into Real Estate?
“One hundred percent,” said Barnes. “I would say 95% of my students and coaching clients are single Black women. There’s a misconception that you have to be wealthy first, or that you can’t do it on a single income, but that’s not true.”
In Barnes’ new book, “Acres,” she highlights the stories of 25 Black investors that built their wealth from the ground up — some of them overcoming homelessness or six-figure debt to build million-dollar portfolios.
“The face of real estate investing is changing and people are realizing that wealth is not a prerequisite, but a byproduct of investing.”
How Do You Think the Industry Has Changed From COVID?
Barnes has seen a mixed bag of reactions to real estate investing brought on by the pandemic. On one hand, people have realized the importance of multiple streams of income when traditional jobs can be taken away at the moment’s notice. On the other, she acknowledges the fear many investors have experienced over tenants not paying rent.
The pandemic has also helped widen the opportunity for long-distance real estate investing. “People are jumping on the remote investing train because they realize that if they live in a high cost of living area, they get a bigger bang for their buck shopping in the lower cost of living areas,” Barnes said.
But overall, Barnes thinks COVID has taught investors to better prepare for all outcomes and be aware that things can quickly change.
“People often find a property and think of one use for it, and those are the only numbers they run,” said Barnes. “But what happens if it doesn’t work out? What happens if something changes, like the county puts restrictions on short-term rentals? When you’re identifying a property, you have to make sure that you’re putting yourself in a position to pivot and still be profitable.”
How Can Real Estate Investors Connect and Learn From One Another?
Barnes’ favorite networking tool has been Instagram, where she connected with almost every investor featured in “Acres” and has been sharing stories of other successful real estate investors through her account for years.
“I’ve met some of my lifelong friends through Instagram, just for the love of investing,” she said.
She also points to Facebook groups, local real estate investing meetups, and networking through social media, with an emphasis on listening to other investor stories and learning from their successes.
“My story is cool, it’s unique, but there’s so many other people out there doing things differently than me that can help someone in a different way.”
Connect, Learn, and Network
You can read more about “Acres” and connect with other real estate investors on the Avail Community Forum, search for real estate investing topics in our library of educational content, or sign up for our newsletter below to receive tips, news, and educational resources right to your inbox.
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It’s normal for rental properties to be vacant for some time, especially during the colder months of the year. However, your rentals should generally have a low vacancy rate to generate a consistent stream of income from your rentals and retain quality tenants long-term.
In this article, we explain what the vacancy rate of a rental property is, how to calculate the vacancy rate for your rentals, and tips to retain tenants for longer.
What Is the Vacancy Rate of a Rental Property?
The vacancy rate is the percentage of units within a rental property that are vacant or unoccupied for a certain period. There are three types of vacancy rates: physical vacancy rate, economic vacancy rate, and market average vacancy rate.
The physical vacancy rate is the amount of time a rental property remained vacant in a year, while the economic vacancy rate is the total gross potential rent of the property that’s been lost. The market vacancy rate is used to determine if an investment property is performing at, above, or below the average market vacancy rate for a designated area.
You can calculate the physical vacancy rate and economic vacancy rate for your rental properties to see how well your properties are performing. Market vacancy rate can be used when shopping for a new rental property to see if it’s worth purchasing based on market information or to see how well your properties are doing compared to local rentals.
Why the Vacancy Rate of a Rental Property Matters
The vacancy rate of a rental property can provide insight on how well your properties are performing. Rental properties with higher vacancy rates than the market average are often due to the property being poorly maintained or landlords being unable to attract tenant interest.
The vacancy rate can also help you determine if anything in your rental property needs changing or if the way you manage your rentals needs to be improved.
How to Calculate Vacancy Rate for Rental Properties
The vacancy rate formula is different for single-family properties and multifamily properties. For single-family properties or apartments, take the total time the unit has been vacant (in weeks) in a year and divide that output by the total weeks the unit could have been rented. If your property has been vacant for two weeks, that number would be divided by the number of weeks in a year (52). Multiply that number by 100 for the vacancy rate percentage of 3.84%.
For multifamily properties, multiply the number of vacant units by 100 and divide that by the number of units in the property. If an apartment with six units has two vacant units, then multiply two by 100 to get 200. Divide that by six units for a vacancy rate of 33.33%.
To calculate the economic vacancy rate for a rental, you can take the total rent lost during the vacancy period and divide it by the total number of potential rent to earn within a year. If a rental property charges $1,300 a month in rent, your gross potential rent would then be $15,600. Let’s say the property has been vacant for 15 days out of a 30 day month, which is 50%. In terms of rent, that would be $650 and an economic vacancy rate of 4.16% when you divide $650 by $15,600.
What Factors Affect the Vacancy Rate in a Rental Property?
Several factors that can affect the vacancy rate of your rentals — the state of the economy, local demand for rentals, property management style, and rent price are all factors to consider. When the economy struggles due to lack of demand and high unemployment rates, this can impact the renting industry.
If you charge too much in rent or are unable to retain tenants, this can also contribute to a high vacancy rate. For that reason, it’s important to stay up to date on the rental industry, local demands for rentals, and what’s considered a fair rent price. It may also be helpful to research what being an awesome landlord means to attract and retain your tenants.
4 Ways to Lower Your Vacancy Rate
If your rental property currently has a high vacancy rate, here are a few things you can do to retain tenants for longer.
- Charge a fair rent price: Your rent price should consider seasonality, local rent comps, the value of your amenities, and current events. When you offer a competitive rent price, it can help attract tenant interest, especially if your rental offers great amenities.
- Handle maintenance requests quickly: When a tenant submits a maintenance request, it’s advised to fix the issue as soon as possible. Taking your time to fix maintenance can lead to a negative experience for the tenants. It’s the landlord’s responsibility to ensure the property is safe and comfortable for the tenants to reside in.
- Offer great amenities: Tenants look for apartment amenities that can result in a better renting experience. Offering benefits such as in-unit washer and dryer or backyard space can generate more interest from local tenants.
- Follow landlord-tenant laws: Local regulations can be regularly updated throughout the year, so it’s important to be aware of new and existing landlord-tenant laws to avoid violating them.
Manage Your Rentals With Avail
The vacancy rate for a rental property can be a great indicator of how well your rental attracts and retains tenants compared to other properties. In addition to following best practices to manage a rental property, you can leverage landlord software to help make renting easier for both you and your tenants. With Avail, you can advertise your rental, screen applications, collect rent online, access lawyer-reviewed lease agreements, and more — all in one place.
Create an account to set up your rental properties and invite your tenants today.
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Increasing home prices and low housing inventory indicate a competitive market for homebuyers in 2022. But with rent prices and the demand for rental housing on the rise, one group of buyers may still be highly motivated and in a good position to purchase property: real estate investors.
Whether you’re looking to buy your first investment property or planning to add another to your portfolio, we’ve analyzed and ranked the largest 50 U.S. markets to invest based on affordability, appreciation, rental income, population growth, and even the share of tenants who pay their rent on time.
Based on Realtor.com® housing market and Avail rental market data, here are the best places to buy a rental property in 2022:
1. Columbus, Ohio
Ranking No. 1 as the best place to invest, Columbus is one of Ohio’s most populous and fastest-growing cities. With a lower cost of living, lively downtown neighborhoods, and an economy boosted by Ohio State University, Columbus has attracted remote workers and transplants from more expensive areas, especially during the pandemic.
Columbus ranked in the top 10 out of 50 metropolitan areas for best investment appreciation (No. 8) and best rental income growth (No. 6). Plus, Avail data shows that 90% of renters in Columbus paid their rent on time in 2021 — ranking No. 8 for highest share of on-time rent payments.
- Best place to invest index score: 87.8
- Median purchase price: $217,100
- Median rental listing price: $1,540
- Rental listing price growth: 4%
2. Orlando-Kissimmee-Sanford, Florida
Greater Orlando is known for its tourist attractions (like Walt Disney World and Universal Studios), but the metropolitan area attracts more than just visitors — Orlando.org reported that the region was welcoming 1,000 new residents per week from slower-growth states. Plus, over half of residents (55%) rent their homes, according to Zumper.
Florida has lower-than-average property taxes and no personal income tax, and the Greater Orlando area ranked No. 2 on our list for best investment appreciation and No. 7 for best rental income growth.
- Best place to invest index score: 86.2
- Median purchase price: $216,600
- Median rental listing price: $1,380
- Rental listing price growth: 3.6%
3. Las Vegas-Henderson-Paradise, Nevada
The Las Vegas-Henderson-Paradise desert offers a moderate winter climate, an economy driven by tourism from the Strip, and the most affordable housing market in our list of top 10 places to invest — especially compared to major cities nearby, like Los Angeles, Phoenix, and San Diego.
Home prices here soared to record-levels during the pandemic, mostly driven by out-of-state cash buyers and investors. While the market is especially competitive, many first-time homebuyers and non-investors have been forced to keep renting due to local competition, continuing the demand for rental properties in the region.
- Best place to invest index score: 85.3
- Median purchase price: $205,800
- Median rental listing price: $1,174
- Rental listing price growth: 2.7%
4. Raleigh, North Carolina
Raleigh is the second-fastest growing city out of the 50 metro areas we analyzed due to explosive population growth over the last several years. Part of the “Research Triangle” (consisting of Raleigh, Durham, and Chapel Hill), the area is known for its universities, greenspace, food scene, and craft breweries, helping it attract and sustain young and educated residents.
Raleigh ranked No. 4 on the Wall Street Journal/Realtor.com® 2021 Emerging Housing Market Index for both investors and homeowners, and Avail data shows that 92% of renters in Raleigh paid their rent on time in 2021 — ranking No. 4 for highest share of on-time rent payments.
- Best place to invest index score: 84
- Median purchase price: $220,600
- Median rental listing price: $1,162
- Rental listing price growth: 1.4%
5. Tampa-St. Petersburg-Clearwater, Florida
Sitting on Florida’s Gulf Coast, the Tampa Bay area offers coastal living and year-round warm weather. According to Redfin, real estate investors bought one in four homes in the Tampa metro area in the third quarter of 2021, and rent prices have surged more than most metros in the country — Realtor.com® reported a November rent increase of 39% year-over-year for the Tampa metro area, second only to Miami-Fort Lauderdale-West Palm Beach.
With lower-than-average state property taxes and no personal income tax, the Tampa-St. Petersburg-Clearwater metro area ranked No. 1 for best investment appreciation and No. 5 for best rental income growth.
- Best place to invest index score: 83
- Median purchase price: $364,200
- Median rental listing price: $1,287
- Rental listing price growth: 4.4%
6. Austin-Round Rock-Georgetown, Texas
The Greater Austin metro area has seen a massive spike in population over the last decade, ranking No. 1 for population growth out of all 50 cities and metropolitan areas we analyzed. Tech companies and transplants from California’s Silicon Valley have been famously relocating to Austin for years, but the city’s growth has been fueled by movers from all across the country.
The demand for housing in Austin is high, and in September of this year, rent prices had surged more than any other tech hub in the country. Austin is one of the top destinations for migrating talent, and according to 2019 Austin Chamber data, 66% of residents lived somewhere else a year earlier — making the area ideal for rentals.
- Best place to invest index score: 80.8
- Median purchase price: $360,100
- Median rental listing price: $1,476
- Rental listing price growth: 1.1%
7. Denver-Aurora-Lakewood, Colorado
Another rapidly-growing region, the Denver metropolitan area has seen an increase in population, cost of living, and rent prices. With its close proximity to Rocky Mountain National Park and the vibrant neighborhoods of Denver, the area offers a mix of outdoor recreation and city culture that attracts newcomers from around the U.S.
According to RentCafe, 51% of homes in Denver are renter-occupied, and the metro area ranked No. 4 on our list for best rental income growth.
- Best place to invest index score: 80.7
- Median purchase price: $374,400
- Median rental listing price: $1,712
- Rental listing price growth: 4.7%
8. Atlanta-Sandy Springs-Roswell, Georgia
Population growth, job growth, and affordability have helped the real estate market in metropolitan Atlanta thrive. While the demand for housing in metro Atlanta is high, the supply is low — especially for single family homes. Within the city of Atlanta itself, Zumper reports that 50% of residents rent their homes, with Gen Z and millennials making up over half of the city’s population.
According to Realtor.com®’s 2022 Housing Forecast data, price growth in the Atlanta metro area is projected to be 3.5% year-over-year — slightly higher than the national average. Metro Atlanta ranked No. 6 for best investment appreciation and No. 9 for best rental income growth.
- Best place to invest index score: 80
- Median purchase price: $269,000
- Median rental listing price: $1,364
- Rental listing price growth: 3.3%
9. Boston-Cambridge-Newton, Massachusetts/New Hampshire
Coming in at No. 9, Greater Boston is one of the pricier areas on our list to buy and rent. With an economy driven by higher education (Boston College, Harvard, and MIT are just a few of the notable universities in the area), healthcare, and finance, Greater Boston is home to both students and affluent professionals looking to rent.
Even as the pandemic drove renters out of major cities (Boston included), data shows many renters are returning to tech-based cities and rents are increasing once again. Boston rents are up 12.9% year-over-year, according to Realtor.com® November rental data, and the Greater Boston area ranked No. 4 for best rental income and No. 2 for best rental income growth.
- Best place to invest index score: 80
- Median purchase price: $1,012,400
- Median rental listing price: $3,491
- Rental listing price growth: 7.7%
10. Riverside-San Bernardino-Ontario, California
Referred to as the “Inland Empire,” the Riverside-San Bernardino-Ontario metro area is a hub for transportation and manufacturing. But its open space, proximity to the mountains, and more affordable housing options have attracted renters and homebuyers from the Los Angeles and Orange County areas — especially during the pandemic.
Like many other cities, the Riverside area saw surging rent increases in the last few months of 2021 — up 39% year-over-year and ranking No. 4 for metros with the fastest-growing rent in November, based on Realtor.com data.
- Best place to invest index score: 79
- Median purchase price: $392,000
- Median rental listing price: $1,383
- Rental listing price growth: 2.9%
Manage Rental Properties With Avail
No matter how big or small your rental portfolio, Avail can help make the renting process simple for landlords and their tenants. Find and screen tenants, create state-specific lease agreements, collect rent online, manage maintenance requests, and more — all in one place, free for unlimited rental units.
Create an account or log in to get started.
Metrics used: Data is based on Realtor.com®’s 2021 median purchase price and annualized growth, Avail 2019-2021 median rental listing prices with annualized growth, 2018-2019 U.S. Census population growth data, and Avail data showing the share of tenants who paid their rent by the end of each month in 2021.
The analysis was conducted based on the 50 largest metro areas in the U.S. Rankings for index score, investment affordability, investment appreciation, rental income, rental income growth, population growth, and share of on-time rent payments were determined using the above data.
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Not all neighborhoods offer properties that can help generate passive income through rent payments, but long-distance real estate investing can help you get around that. Thanks to the internet and smartphones, it’s now easier than ever to purchase a property in a different state and manage your properties remotely.
However, remote real estate investing needs to be treated differently than managing a local rental property, since there’s a higher risk involved. That’s why we outlined seven things to know about long-distance real estate investing to keep in mind when getting started in real estate.
7 Tips for Long-Distance Real Estate Investing
Long-distance real estate investing is a great way to get started in real estate if you live in an area with low demand for rentals. However, there are more risks associated with managing a rental remotely, since you’re not able to be as present as the landlord.
To help you along the process, here are seven tips on remote real estate investing that are important to keep in mind.
1. Research Markets You’re Interested in
Research markets you’re interested in to check the demand for rentals and the types of properties available. Rental reports, like the Realtor.com® Rental Housing Forecast, share insights on rental market trends and predictions that landlords, tenants, and real estate investors can expect in the upcoming year.
There are also certain things you’ll want to look out for in a rental property, such as property taxes, local schools, average rents, amenities, and property history before looking to buy. By researching markets you’re interested in and the current rental market, you can get a better understanding of which markets are worth investing in.
2. Check Your Property’s Profitability
Finding a rental property that meets your criteria is just the first step of real estate investing. You’ll also want to make sure the property can help generate passive income that can cover operating expenses or other property-related costs.
After totaling your operating expenses and determining a rent price, use a rental property calculator to see if the property you’re interested in would be profitable. The Avail Rental Property Calculator is a free resource you can use to help you determine which property has a higher chance of producing profits from rent payments, as well as whether or not your rent price or operating expenses need to be adjusted.
3. Find Reliable Contractors
The key to long-distance real estate investing is finding a team of reliable contractors that can help fix maintenance issues or be the go-to person for your tenants. Platforms like Yelp, Thumbtack, and TaskRabbit are good resources to use to find highly-rated contractors to rely on.
You can also hire a property manager close to the property to manage all maintenance and repair issues. If you do decide to hire a property manager, you’ll want to ensure they’re aware of local landlord-tenant laws and local ordinances they’ll need to abide by when managing your tenants.
4. Implement a Solid Tenant Screening Process
Implementing a strong tenant screening process increases the likelihood of finding a tenant that pays rent on time and takes care of your property. You can request a rental application, credit check, criminal check, and eviction check to get a full picture on prospective tenants. Some states restrict exactly how much a landlord can screen a tenant, so make sure the process you implement does not violate local regulations.
5. Leverage Landlord Software to Manage Your Rentals
Property management software platforms like Avail allow you to streamline the rental process — all in one place. Instead of having to use more than one website, you can screen tenants, collect rent payments, create lawyer-reviewed lease agreements, manage maintenance requests, and more through one platform.
If you decide to hire a property manager, they can also use Avail to manage your rental, which you can access at any point.
6. Request Videos and Photos of the Property
Thanks to smartphones, you can now request videos and photos of your property from your tenants throughout the lease term. Videos and photos allow you to see the current state of your property or get a better look at maintenance issues. However, it’s important to never rely solely on videos and photos since they can be easily manipulated by the sender.
7. Schedule Annual Visits
It’s important to schedule a visit at least once a year to get a closer look at the current state of your rental. Most states do not allow the landlord to show up to the property without proper notice, so your tenants will need to be notified before the visit.
During the visit, you can thoroughly check your property and ask your tenants about any issues they may be experiencing.
Manage Your Rentals With Avail
Long-distance real estate investing is a great way to generate income each month, even if you don’t live in an area with high demand for rentals. With Avail, you can easily advertise your rental listing, collect rent payments, create and store lease agreements, and manage maintenance requests on one platform that can be accessed on any device.
Create an account or log in today to manage your rentals with Avail.
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It may seem like any cost associated with your rental property is an operating expense, but this is often not the case. Costs that directly impact the operation of your rental business are considered rental property operating expenses, but tracking the wrong expenses can result in incorrect financial reporting, making it harder to know exactly how well your rental business is performing.
We guide you through the process of identifying and calculating rental property operating expenses so that you can track expenses correctly as a landlord.
What Are Operating Expenses for a Rental?
Rental property operating expenses affect the day-to-day operations of your business and are necessary to manage a rental property. Examples of operating expenses to expect as a landlord are the following:
- Advertising
- Auto and travel if you commute to your rental
- Cleaning and maintenance
- Landlord insurance premiums
- Legal and other professional fees
- Property management fees (if applicable)
- Mortgage interest that’s been paid for the year
- Maintenance and home repairs
- Landlord software fees
- Property taxes
- Homeowners Association (HOA) fees
- Utilities
- Depreciation expense
The expenses listed above will also need to be added to your 1040 tax form, so it’s important to track how much you’ve spent in each category for all of your rental properties.
How to Calculate Rental Property Operating Expenses
Renting out a property requires you to cover certain expenses, which is why it’s important to monitor your expenses to avoid paying more than your rental income. To calculate operating expenses, divide the total of your expenses by the rent price you’re charging tenants (or rental income). If your operating expenses total $500 for a rental with a rent price of $1,375, your gross operating income (GOI) would then be 36.3%.
Most landlords try to keep their gross operating income — the total operating expense in relation to total revenue or income — around 35% to 45% for each rental. If you find that your operating expenses are higher than 45%, you may need to analyze your expenses to ensure you’re not spending more than you’re earning in rental income. On the other hand, a GOI below 35% may indicate an important expense is missing.
How to Cover Rental Property Operating Expenses With Rent Payments
The rent price for your rental should be competitive for your area and help cover your operating expenses. Your expense total for each month and a list of local rental comps can help you determine a rent price that will help generate passive income while remaining fair for the designated area.
It’s important to note that your rent price should not be influenced by the expenses you’re hoping to cover with rent payments. This can result in overcharging for rent and deterring prospective tenants from applying for your property.
How Much Profit Should You Make on a Rental Property?
The profits your rental generates will depend on the rent price you charge and your monthly operating expenses. Property investors usually determine their ideal profit for each rental before launching a rental business to have a better idea of their goals.
If you’re still unsure of how much profit your rental property should be generating, you can create a rental property business plan that outlines the operations and financial information of your business and can be referenced throughout the year or shared with other real estate investors.
Track Rental Income and Collect Rent Payments With Avail
The goal of a rental business is to generate a passive income that can cover expenses and generate a profit. To keep track of the progress of your business, you can collect rent payments and other rental fees with Avail for all of your rental properties. Once you collect payments, you can access the Avail Rental Property Accounting tool to keep track of all of your rental income and operating expenses to make tax return season easier.
Create an account to start collecting rent payments with Avail and manage your rental properties.
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