Property ownership is one of the safest investments you can contemplate as part of your financial portfolio. Real estate prices seldom depreciate, and you are likely to get more than you paid when selling.
Real estate investment can include buying rental properties and renting them out to tenants. The investor might not see immediate profit as the rental income covers the mortgage and other expenses. However, the property is theirs to sell when necessary. Here are tips to make a suitable rental property investment:
Do not go it alone
Renting out property is not a passive income earning source. Dealing with unruly tenants, late payments, and unscheduled maintenance can be time-consuming. Investors who work full-time find it challenging as they lack time to deal with these issues.
Affordable Property Management (APM) is a California-based company with decades of experience in rental property management. A property management company can make a landlord’s life much easier. They take care of the day-to-day minutiae that form part of renting out property. The company’s agents can deal with multiple issues without placing any additional burden on a landlord.
Location
Thorough research about the area you want to buy a rental property is essential for long-term success. Regions on the decline, where jobs are scarce, and prices are dropping, are not an ideal investment. Read up on crime statistics in a neighborhood as these can affect your ability to find tenants and earn a good rental income.
Most rental property owners prefer long-term renters instead of a high turnover of tenants. Typically, long-term tenants are family units with children. Parents will rent a home for many years to offer their children stability. Ensure that the property you buy is near to good schools in the area.
Cost
Price will undoubtedly enter the equation when determining if a specific property is a worthwhile investment. Establish what similar properties in the area are selling for to see if the one you are interested in has a market-related price. A property with a suspiciously low selling price usually has issues that will require repair and maintenance before you can rent it out.
Calculate the monthly mortgage repayments and property taxes and allocate an additional sum for maintenance and repairs. This is a minimum rental price that tenants should pay. Compare that figure with average rental prices for similar properties in the area to determine its competitiveness. If it is realistic to charge rent per your calculation, this property could be an ideal investment.
Mind over matter
Remember that buying a rental property is not the same as buying a home. A rental property investment decision should not have emotion attached to it as the landlord does not intend to live there. The numbers should strictly govern your choice and whether this investment will be to your advantage.
Any financial investment has a risk attached to it. Mitigate any potential risks with thorough research and data-driven decision-making. The payoff should outweigh any risks that buying a property involves.
Avoid fixer-uppers
A home that needs significant renovations is not an advisable investment if you are interested in owning rental property. House flippers buy cheap properties, renovate them and sell shortly afterward. Therefore, avoid falling into the trap of purchasing a less expensive home that requires much attention.
Landlords need to make money from rental income as soon after purchase as possible. Therefore, costly renovations that leave the house uninhabitable for months on end should not be a concern. Cosmetic changes, such as painting or replacing some fixtures, do not take long and will not prevent new tenants from moving in within days instead of weeks or months.