Buy an investment property. Find renters. Collect rent. Make money.
This sounds like a great plan. If only it was that easy!
Many people have a dream of buying as many investment properties as they can, renting them all to responsible tenants, and collecting large amounts of rental income for the next several decades as a result.
But wait. It’s never quite that simple.
Investing in Rental Properties
Deciding to purchase rental properties is a big decision. To be a successful and profitable rental property owner takes time, commitment, knowledge, and effort. Owning rental properties is a tough job – and it’s not easy.
Owning rental properties will not automatically position you for profits. If you are seriously thinking about purchasing rental properties that will be used to generate income, there are a few things you should know if you want to be successful.
Understand mortgage interest rates for rental properties. If you intend to purchase rental properties with a mortgage, make sure to factor the interest rate into your profit calculations. The mortgage interest rate on investment properties are generally higher than they are on a primary residence.
Decide if you want to hire someone to manage the properties. If you live near your rental properties, you may be able to manage the properties on your own. But if the properties are a significant distance from your home, hiring a manager or management company might be unavoidable. This may be an expense you did not originally anticipate.
Find good renters. Not everyone makes a good renter. It may take you a while to understand the differences between reliable renters and renters that will be problematic. There are housing discrimination laws in existence, and it’s important to understand them.
Learn about the public school districts that serves the properties. Many renters are concerned about public schools. They want their children to attend schools with good reputations, and will consequently elect to rent in specific neighborhoods. If you want to own rental properties that are appealing to families with young children, make sure to evaluate the public schools that serve them.
Realize that there are other expenses, such as property taxes. Depending on the state and the value of the properties, you may have to pay a significant amount of money each year for property taxes. You may have to adjust the rent to account for this expense.
Your rental properties will need maintenance and repairs. There is no such thing as a piece of property that doesn’t require periodic maintenance and repairs. When you own rental properties, you are responsible for fixing problems quickly and correctly.
Owning rental properties can be an excellent method for generating a monthly income. Rental properties can also be great investments over the course of many years. If you are up for the challenge, buying rental properties has the potential to be a positive and lucrative endeavor.