Investing in real estate is the most popular and safest way of earning money. A lot of properties are purchased and renovated to generate long-term, passive income. That makes owning a rental property a very profitable business, but it may not be as easy as it sounds. If you have some savings and want to try your luck in this field, we’ve made a guide for investing in rental property for beginners. Starting and sustaining in this field is hard, and that’s why it’s essential to know everything there is about it.
Do the calculations and estimates
Investing in real estate seems simple, but it is necessary to examine all influencing factors before trying to generate passive income. Since renting is done for profit, it is essential to know how much your property is worth in the rental market. The first thing to look at is the location. It is crucial to research the current prices of apartments and homes in the same rank as yours.
The area where your property is located, the size and structure of the apartment, and nearby amenities are the three most important factors to consider when trying to set up the price. Apartments in city centers are always worth more. However, it is also convenient if your property is located near a college.
Things future landlords need to know
Before even considering investing in rental property, you need to know some unwritten real estate rental laws. For example, if you plan to rent a beach house or a cottage, you need to know you will generate no income for a couple of months a year during the off-season.
But no matter the type of property you plan to rent, it’s essential to remember that being a landlord is time-consuming. You have to interview tenants, cover utilities and maintenance, etc. Plus, if you own a short-term rental, your passive income will become a full-time job with long-lasting engagement. Thus, if you thought your job ends with leasing the place, think again. From covering recurring costs of repairs to dealing with landlord-tenant laws, having renters is never easy.
Still, if you were to become a great landlord in the Big Apple, your investment would pay off significantly. Big cities such as NYC, LA, Boston, and San Francisco have the most expensive rents in the US. The cost of renting a home is largely determined by location and traffic connections in the immediate vicinity. After all, if you want to be in the center of happenings, you have to pay for it.
Make your rental property desirable
Even though the rental’s location usually determines the price, the appeal of your property matters as well. The best way to earn while renting or selling real estate is through return on investment. If the house or an apartment is old, or you’ve bought a fixer-upper, renovating or remodeling is necessary. Inspect everything and prioritize what should be done first according to your budget. While you’re at it, upgrade carpentry, electrical installations, plumbing, and heating.
Some of these fixes can be done as a DIY project, but some will require professional help.
And even though all of these upgrades matter, nothing is more appealing than remodeled kitchen and bathroom areas. Making them look more luxurious will add value to your rental property. Still, if you want to offer a fully equipped apartment, investing in appliances is necessary. A new refrigerator, stove, or washing machine can make a big difference. Never underestimate the importance of first impressions and visual appeal.
Investing in commercial real estate
Lately, commercial rental properties have become more profitable than residential. This is due to a growing demand for offices and workspaces. Many entrepreneurs want to start their own businesses, which means non-residential spaces have become an excellent investment opportunity. Thus, purchasing a commercial property in the city or near big industrial centers is always a wise idea.
Advertising the property
To have as many potential tenants as possible, you need to advertise your property well. People pay attention to photos, so make sure to have quality ones. If you decide to advertise online, virtual tours might also be an excellent idea. Whatever your choice of marketing is, try to present your property in the best possible way. If you’re still not sure how to do it, you can hire experts to help you.
What to expect in the real estate business
If everything goes well, expect a potential return on property investment after 2-3 years from the beginning of your venture. Still, to be safe, constantly monitor the situation in the country and the economic conditions that follow. There is always a possibility the demand for housing in an area will decline due to a change in the taxing. Standards are constantly changing, and rental properties must meet them. So, before you invest your hard-earned money, make sure to research and analyze everything to make the safest choices.
Professionalism is imperative
From showing the apartment and getting to know the tenant to signing the lease, it’s necessary to be professional at all times. Most landlords take deposits, and the amount may vary from state to state since they are based on landlord-tenant laws. Still, it’s essential to be fair and not change the terms of the lease. Therefore, do not increase the rent at your discretion because mutual trust is crucial in every relationship.
Business endeavors like investing in rental property are great opportunities to make relatively easy money. But like any investment, this one requires time, attention, and effort. Still, in the end, it pays off many times over, so you need to be patient and careful. You will quickly learn the rules of investing and how to make the next purchase or expansion of your real estate venture even better.