An informative guide to investing in rental properties for beginners.
There are many ways to make money in real estate, but investing in rental properties is by far the most lucrative, offering investors a twofold investment return; a steady residual income from the monthly rental and the equity from the property itself. Building wealth from rental property investments should not be taken lightly though; there are many things to consider before you purchase your first property. Here is a practical guide to investing in rental properties for beginners.
Look for properties that will require little or no repairs to get it ready to rent, down time means you will have no income from the property until it is rented. It is also important to use a balance sheet for each property that you intend to rent, this will show you how much you have invested in the purchase and repairs with the amount of return you can expect once the property is rented. Every detail of your investment strategy should be well planned with attention to the day to day management and maintenance as well as rental contracts. It is a good idea to also have a list of qualified repairmen to handle any potential emergency situation. You should also research the area you plan to rent in. Knowing the personal and financial climate of the area will give you valuable information to help you determine if the location is right for you.
Properties in popular seasonal locations have the potential for higher rental rates and could also be rented weekly. Another great rental investment idea is business property, rental rates are almost always higher for this type of property and most rentals of this type require a long-term commitment. Consider each possible rental property you view with its overall potential for quick profit, and ask yourself; is this an ideal location for such a property? How quickly can this property be ready to rent? What is the total amount I will need to invest, and what is return amount on my investment?
If you plan on purchasing your first rental property with a loan, then you will need to develop a spread sheet for the property you intent to purchase. A typical spreadsheet will cover a 12-month time line and include all income and expenses for the property; most of this information can be found in your personal balance sheet you created for the property. Along with your spreadsheet you will need to have a business plan that outlines your proposal to purchase and maintain your rental property. Your business plan should include the type of property you plan to rent, how you intend to manage and maintain your property and be sure to include any information that shows your ability to be profitable; a popular seasonal location or high traffic business or commercial property or other rental property with a high profit potential. You will also need to include how you intend to overcome any potential obstacles. Investing in rental properties for beginners is a lucrative means to achieving a long term residual income.