One of the smartest strategies you can have as a real estate investor is to develop a farm area. This is a geographical area that you focus on to identify potential rental properties for investment. Having your rental properties near each other provides you with several benefits.
This guide will explain five benefits you’ll enjoy when your rental properties are in close proximity to each other.
1. Consolidated Overhead
When all of your properties are close together, you can consolidate your management and overhead. You’ll spend less time traveling between the properties, which reduces your total time spent traveling and managing the properties. This reduces your fuel costs, vehicle upkeep, and time.
You’ll also only need one vendor for services done on the properties. This will reduce the amount of time you spend receiving, processing, and making payments to invoices.
2. Single Point of Management
When all of your properties are close to each other, you can create a centralized management point. This reduces the number of people you need to manage your properties or the time it takes to travel to each property.
When you’re required to visit one property, you’re close enough to swing by and look at another property. This proximity allows you to better maintain all of your properties by observing needs before your tenant notifies you of them.
3. Economy of Scale
When you have multiple investment properties that are in close proximity, you can take advantage of economies of scale. Use your properties to your advantage when negotiating with vendors for goods and services. You could arrange for landscaping maintenance with a single company for all properties.
Larger purchases can also be made at a discount by contracting for bulk purchases. Perhaps you arrange for the purchase of new household appliances. This makes each purchase more affordable and allows you to do more with your budget.
4. Submarket Development
When you choose a specific neighborhood for your farming area, you can begin to develop a submarket that you have significant control over. By developing and improving your multiple properties within the neighborhood, you improve the neighborhood’s overall value. This allows you to increase the rent for each of your properties.
Take care with the tenants you choose, since they’ll all be neighbors. You’ll want people who will take care of the house and property to maintain the neighborhood’s look. Aim to create a submarket that’s a desirable place to live.
Additionally, you’ll find that tenants will report on each other. While this may sound potentially annoying, it’s incredibly helpful. Your tenants have an incentive to maintain a pleasant community, and by reporting, you can address problems quickly to prevent more significant issues from developing.
5. Smart Investment Decisions
When you choose a focused geographical area, you develop an in-depth understanding of that particular area. The most significant benefit of this is that you can make smarter and more informed property purchasing decisions. This will reduce your risk of investing in a dud property or in an area that’s undesirable.
Develop Your Investment Farming Area
These five benefits should be more than enough to convince you that it’s time to develop your farming area. Start by choosing a focused geographical area for you to learn about and invest in. Once you’ve developed this area and have your desired number of properties, then you can choose a second farm area to invest in. Through a systematic farming effort, you can create clusters of properties.
PMI JCM Realty Group