Investing in a rental property can be a lucrative venture. Many people earn an excellent passive income from rental properties they own and manage. From vacation homes to apartment homes, there are plenty of rental property investments available.
More than 36% of people in the United States rent their home – that’s the highest percentage in a half-century! If you are considering buying a rental property to generate income, there are many factors to consider. Read on and learn if buying an investment property is right for you.
1. Find the Right Location
The right location can make all the difference when you are investing in real estate. Suppose you want to purchase a vacation property to rent to visiting tourists. Find a property that is near the most popular spots people visit.
Rental properties in areas of town where crime is high do not attract quality tenants. But homes in single-family neighborhoods have a higher chance of being profitable because 87% pay their rent on time.
2. Buying a Rental Property Means Managing Properties
Good property management is essential for a successful rental property investment strategy. If you don’t want to take on the time and expense of overseeing your rental properties’ daily maintenance and care, consider hiring a property management company.
A qualified property management service is a sizeable investment, but it can end up costing you less time and money than taking care of the properties yourself. Whether you manage the properties or hire someone to do so, it’s crucial to provide regular maintenance and repairs to keep tenants happy.
One way to ensure your next tenant is happy with their home is a clean property when they move in. Most tenants don’t bother to give a rental property a deep clean when they move out. This guide to end of tenancy cleaning explains everything you should do when a tenant leaves one of your properties.
3. Know All the Costs
There are many costs associated with a rental property that go beyond the price of the home. Without knowing all the costs, you won’t be able to set a profitable rental rate. Here are some of the fixed and variable costs associated with rental properties:
- Realtor and broker fees
- Closing costs
- Property insurance
- Property taxes
- Marking and advertising
- Maintenance and cleaning
- Other property management services
4. Be Strategic
The most profitable rental property owners take a strategic approach to property investments. Buying several single-family homes will increase the likelihood of attracting quality, long-term tenants that require less maintenance help. Vacation rentals will require more cleaning and maintenance but can garner higher rental rates if they are in high-demand areas.
Invest in Your Future
Buying a rental property can be a great way to generate passive income for you and your family. Choose properties in locations that attract quality tenants to increase your chances at profitability. Consider whether you want to be a hands-on property manager or if hiring a property management company makes more sense.
Know all the costs before you buy so you can set a rental rate that is profitable and select properties that make up a strategic investment plan for your future.