Did you know that many of the world’s wealthiest individuals made their fortunes because of real estate investment? In many cases, those investment strategies involved rental properties. While you may not have dreams of becoming a billionaire or even a multi-millionaire, you can certainly finance a more comfortable lifestyle by getting involved in this type of investment opportunity.
Real estate has many potential avenues to profits, but rental properties are one of the most reliable. Flipping houses can be risky because of how much money is poured into renovations and buyer hesitation. A real estate investment trust can be much safer, but the potential reward is therefore less.
With rental properties, you get to take advantage of a unique source of income: rental payments. Whether these payments come from residential or business tenants, consistency is often very desirable to property owners. Here are a few steps to take when getting started with your rental property investment plans.
Find a Real Estate Agent
An underrated partner for your rental property strategy is a real estate agent. Many people elect to skip this step because they want to find a property themselves. However, these agents have significant connections in the area you want to buy property in. They are usually the first to know about a property going up for sale. They also likely have a network of local contractors that they can recommend if your property needs some fixing up before tenants come into the picture. An agent can offer insight on current rental rates, similar properties, and getting a good deal on the property you want. Don’t be afraid to work with a real estate agent as you evaluate potential investments.
Research, Research, Research
No one is an expert on a subject in which they have no practical experience. If this is your first time looking into rental properties, then there are a million ways to mess up and lose money on your first investment. You need a strong property investment strategy to get started on the right foot, and this will only come with research. Learn about the world of rental property investing and what types of numbers you need to understand. Research the needs of your target audience to understand what properties and amenities would appeal to them. Find the right lender who can help finance your purchase with favorable terms.
Determine Your Management Capabilities
Rental properties are not passive income opportunities, at least not without some extra work. It takes a lot of attention to manage a property, acquire tenants, handle lease agreements, collect payments, respond to maintenance issues, and do any other tasks associated with running the property. To nip this issue in the bud, you’ll need to figure out what your management capabilities are. If you are ready to tackle all those tasks yourself, then go for it. However, if this sounds overwhelming, then you may need the help of a property management company to run your rental property.
Create a Positive Tenant/Guest Experience
Keeping vacancy rates low is the key to profiting from rental properties, whether they are residential or commercial. The less time the unit is empty, the more income you are receiving. To keep the property occupied, you need to create a positive experience for the tenant. The space needs to have enough amenities to draw their interest. Communication must be smooth between you and the tenant so there are no misunderstandings that could cause them to leave. Responding quickly to maintenance requests will ensure they are comfortable in the space, making them less likely to vacate the unit. As the property owner, it is your responsibility to create a positive experience for all tenants, both current and future.
Choose a Financing Strategy
In most cases, investors do not have the means to buy a property upfront. For this reason, you will need a financing strategy to get started as a rental property owner. The larger the property, the more complex the process will be. For example, if you just want to turn part of your home into a studio apartment and simply need some cash for renovations, then a refinance could do the trick. If you are buying a single-family household, then a traditional home loan might be the way to go. Purchasing a larger rental property may be easier with a debt-service coverage ratio loan that is approved based on projected income rather than the borrower’s income. Either way, the right financing strategy could make profitability easier with your first rental.
Start Saving for a More Comfortable Lifestyle With a Rental Property
Real estate investing could be the solution you are seeking for growing your savings. With the right strategy around financing, marketing, and choosing the perfect property, you could add a source of steady income to your investment portfolio. Eventually, you can add more properties to your collection to amp up your earnings even further.