Rental property investment is one of those long term passive income strategies. It requires very low manual labor except for times when you have to renovate or repair, particularly when changing tenants.
An increasing number of people are investing in this sector, and you cannot blame them seeing how it offers a steady profit, mortgage payments through rent collected and the low activity required to maintain turnover.
If you are considering rental property investments, you might want to take a look at the following points 5 key points are a must know:
Where you buy and subsequently rent your property is probably the most important factor for your investment portfolio. For example, if you want to rent a house that has poor connection to the main streets or insufficient transport systems, you might not get people to be interested to rent your property. Your location dictates if your tenant can get to their workplace easily and quickly. Some people prefer to live nearby markets or restaurants, or a nice view of a park or a lake. If your property is nearby such a location than it will be in high demand. Similarly, industrial areas with lots of noise and pollution will be a low demand zone.
If you are going to own a rental property, you must know your numbers accurately. You have to know what the property is actually worth. Do research on the average rent expected of an apartment or house based on number of rooms and location. If you set the rent too high, you will be hard pressed to find a tenant and if you set it too low, you are investing in a property with poor outcome. Also, if you do not know the amounts you have to pay as bills such as utilities, insurance, HOA fees, you are likely to set a wrong rent rate and your cash flow will be hampered.
You will have to give special care to your property and be able to monitor and control everything related to it. If you want to rent out your property, it needs to be in maintained regularly. You can hire professional help or do it yourself. Property management is a large sector in itself and you can always find help for the things you lack knowledge about.
Proper tenant screening is as important as anything when it comes to rental property investment. Without right tenants, no matter how good your property is or how well you maintain it, it’s unlikely to be profitable for you at any capacity. You have to ensure that you know exactly who your tenants are, their background and their records which will tell you what you can expect from them. Also, perform a background check on their financial status and ensure that they can still pay rent. You may want to check for major police records. Even though it is legal to rent a house to a former wrongdoer, it might backfire against you. Also, if you do not have all necessary information about new tenants, you would be breaking the law yourself in many states.
It is important to keep your property in excellent shape if you want to keep making money from it regularly. This means you should check if your house needs any repair or renovation. A potential client may decide to look elsewhere if the property is not in good shape.
Follow the above 5 principles and ensure continued success to your rental property investments. Looking for more tips on real estate? Learn more here.