Given that more people are renting their homes today than at any point since the 1960s, if you own rental properties, you stand to make some money. However, when you have rental property, you need to ensure that you’re prepared to be a landlord with all that work entails. Being a landlord requires you to be attentive and to have a positive relationship with your tenants for the best results.
Here are four things to think about when you’re looking to make money on rental properties.
1. Consider Your Location
When you’re looking at the possibility of making money from real estate, you need to start by looking at your location. You could take the path of most people and look for properties that are valuable or on their way up. If you buy space in the middle of the woods, you’ll get a lot of property for cheap but it might take a while before that land or those buildings are worth anything.
Location matters because ultimately, you’ll need people there to rent or buy the property you’re looking to make money from. When you’re trying to make money from rental properties, being in a populated area is going to bring you more renters but also come at a higher premium.
If you want to succeed in the world of property rental, you need to know your market. If you’re in a big college area, you’ll have to market to the amount of money college students can afford. You’ll also have to deal with a lot of turnover.
If you’re in a city that’s got a growing tech industry, you’ll be able to charge more but could see your property taxes increase in coming years. Learn about what’s happening in the region in the coming years before you invest.
2. What’s Your Budget?
If you want to ensure that you can afford the kind of property that will make you money, you need to think carefully about your budget. You need to not only make sure you can afford to buy the property you’re looking for but you also need to have money for all of the incidentals.
There will be taxes and fees that go along with owning rental property. You’ll also have to worry about paying for repairs and maintenance. Having some money set aside to handle these elements of owning a rental property keeps you from dealing with disasters.
You’ll also need to set money aside for insurance and kind of issues that you could face along the way. You need to keep up with insurance on your property to ensure that you’re protected in case of any emergencies. You also need to have liability insurance to cover you if someone is injured on your property.
A budget also helps you to understand your potential for growth. If you’re able to buy more properties, you can flip them and reinvest faster. If you have to live at your property while you build up your wealth, it’ll take longer for you to build sustainable wealth.
3. Commercial or Residential?
One of the biggest decisions to make when you’re deciding on investing in rental property is to go with commercial or residential. In most cases, there’s a higher potential for growth and larger profits when you go with commercial, but the stakes are much higher. Getting into residential property takes less from you to get started in your investment and can allow you to deal with fewer complications.
When you rent commercial property, you need to find a niche that you want to settle into. If you don’t your life as a commercial real estate owner is going to be complicated as a variety of different commercial tenants have varied needs. Some will require you to invest in their buildout of a space and having tenants who conflict is highly possible.
You should try to have a potential niche for the types of properties that you want to invest in so that you can build a strong community of businesses. Renting out to health and wellness companies can give you options to have yoga studios, medical offices, and even grocers and restaurants.
If you choose to work in residential real estate, you’ll have to find your target market. If you have a few small houses, you’ll be renting out to families, students, or younger people. If you get a larger luxury building, you’ll be able to access a high-end market if your region can bear that kind of property.
4. What Are Your Financial Goals?
Part of investing is knowing what your overall financial goals are. If you don’t know what you want, then you won’t know where to go with all of your property and investments.
If you’re looking to build a small enterprise comprised of multiple rental properties, you should seek out similar properties so that all of your properties work together. When you’re first starting out, you might need to share management staff across multiple properties. If they all have similar markets, needs, and demographics, it’ll be easy to share resources.
While you need to invest quite a lot to get started in property rental, you need to also have a path that you’re headed for. The clearer your path is, the easier it’ll be to make sure every decision that you or your staff makes is oriented toward your goals.
If you want to branch out from commercial to residential or vice versa, you need to have a strong stake in one market or the other first. To understand how much you could be profiting from rental properties, check out highreturnrealestate.com.
Rental Property Is a Great Way to Build Passive Income
One of the best things about owning rental property is that you get the chance to make some passive income. Passive income streams allow you to build wealth even with the ups and downs of your day to day finances still settling out.
If you’re looking to get started, even with subpar credit, check out our guide for tips on how you could still be getting the loans you need.