Buying property and renting it out is one investment that rakes in passive income. It may take a lot of effort and possibly some time before you can actually get your rental property running, but once it’s set up, you will be able to enjoy income flow without having to do much work from your end.
How much you will earn and how much you will have to shell out to get into the property rental business depends on many factors. If you plan to go this route, here are some things to consider before making a big decision.
The house and land location plays a crucial role in how much you can earn from the venture. In general, properties that are near schools, churches, supermarkets, and major highways tend to appreciate over the years. They are also popular with renters. They can cost higher than other properties for sale, though, and you may have to shell out a hefty amount initially. Nonetheless, the return on investment on such assets can also be relatively high, even more than the amount you spent on the investment.
Type of Property
There are several types of rental properties that you can invest in. Common types include apartments, condominium units, luxury properties, townhomes, vacation homes, multi-family buildings, commercial spaces, and single-family houses. The earning potentials and the costs of these homes can also depend on factors such as their location. For instance, a single-family home may be located in middle-class areas where workforce tenants are likely to rent. On the other hand, luxury properties are mostly targeted towards high-end renters and may be found in places where people with money usually live.
Understand that every rental property may have its pros and cons. Before deciding which property to buy for investment purposes, decide first what demographics your target market comes from. Will you be serving millennials or baby boomers? Do you want to target families who are willing to rent properties at higher prices provided they are offered top-of-the-art facilities and amenities? Or do you want to rent the property to workers and students? All these must factor into your plans before buying any property for the venture you have in mind.
Any piece of land and home can look attractive to buyers, especially if they are newly-renovated. Before jumping out to buy any property, make sure to know if it is located in an area that is safe from the usual hazards caused by nature. Is the property prone to flooding? Is the property close to a fault zone or an area prone to fires? Natural hazards can cause innumerable damage to homes and may even cause some land parcels to have unstable soil.
Talk with Professionals
Real estate agents are excellent sources of information when it comes to buying properties. They know the business’s ins and outs, and they have first-hand knowledge of the best homes and land to invest in. They know which properties are likely to get more renters for investors, and which assets provide lower investments with potentially higher ROI. These professionals also know the neighbourhood where the property is located.
For first-time investors, real estate agents may seem like a bunch of monsters waiting to rip money off from clients. However, in the long run, they provide invaluable help that can make you save more and earn more with your investments. They also save you time in scouting out for the best investment properties.
Just like any other markets, the market for real estate can fluctuate at any time. To get the best out of your investment, always be aware of market trends that may affect the investment you have in mind. Trends and market statistics you should look out for include mortgage rates, home prices and their sales, inventories, construction activities, and many more.
Apart from property rentals, you can also venture out to some other types of investments that involve land and homes. A diverse portfolio provides you with better chances of ROI and higher passive earning potential. Other forms of real estate investment include buying and selling raw land, trading in real estate investment trusts or REITs, joining crowdfunding platforms, and buying and selling residential and commercial properties.
Whatever type of real estate investment you put your money on, always remember to be hands-on and not rely on others to manage your funds. This way, you will have a first-hand experience of the procedures required for each venture, and you will learn better techniques to leverage your business to success.