You might have come to the conclusion that buying a rental property is a smart and lucrative investment. If you are a first-timer, it would be wise to take all the necessary precautions since you would not want to find yourself in a pickle. It is important to do your research beforehand and that is why we have created this beginner’s guide for you to follow should you decide to get into rental property ownership.
Select the Type of Rental Property
You will need to look into what type of rental property you want as there are three: traditional, vacation, and turnkey rentals. Traditional rentals are investment properties that you have bought and rent out to long-term tenants. Vacation rentals, on the other hand, are those which you rent out short-term to holiday-makers, usually for a period of 6 months or less. These can be more profitable than traditional rentals. Turnkey rentals are similar to traditional rentals in the sense that they are also rented out to long-term tenants. However, they are bought from companies instead of individual sellers, and these companies handle everything, including managing the property and its tenants, which might be more convenient for beginners.
Choose How You Want to Make Money
There are several ways to build wealth through rental properties. You will need to decide which way will prove more beneficial for you. You can opt for cash flow, which is the net profit you will receive from a single rental after paying your total expenses. The cash flow makes sure you profit from your investment.
Then there is Passive Income where you, the investor, would not have to do anything at all. You can purchase a turnkey rental to gain passive income or invest in a property management software that is designed to help you manage all kinds of properties and keep digital records. Other people opt for real estate appreciation, where you get to sell your rental a few years later once the value of the investment property rises and receive a higher price than the one you initially bought it for. Lastly, you can choose to make money through tax benefits; this is where owners can qualify for tax breaks. Investors can have taxable income deducted by writing off interest on property maintenance, mortgage, repairs, etc.
Choose The Location
You may have heard that when it comes to real estate, it’s all about location. Where to invest is pivotal in order to reap the benefits of being a property investor. As a beginner, you will need to pay attention when it comes to location and incorporate the type of rental you want into the decision. If you opt for vacation rentals, then following trendy locations should suffice. But if you are renting out long-term, you will need to make sure that the property will always generate interest. It is also important to note that the location should include a growing rental population, a strong job market, and a healthy economy.
Owning a rental property is one of the best investments out there, and anyone can do it! Dedicate the right amount of research to ensure you choose the right rental type that suits your needs, opt for the most financially beneficial methods, and make sure you select the best location.