Investing In Rental Property

Investing in rental property is a great opportunity to build wealth and achieve a monthly cash flow. There are two reasons why an investor would consider owning rental property: cash flow and equity growth. Depending on the property, down payment and rental amount, it is possible you can have the best of both worlds. Or put simply, if you have a rental property that has low expenses and demands a strong rent, you will see the benefits of cash flow every month. A good investment is something that will pay you more than you paid for it. So, in terms of real estate, buying the right long-term rental property could very well be the best investment you end up making. 

People always need a place to live…

 

Investing in rental property isn’t for the faint of heart, but with adequate due diligence and considering the following tips it may be well worth it…

Long-Term Rental Properties

People always need a place to live, which is why investing in long-term rental properties is such a big business. In fact, the real estate market will go up and down. But, the beauty of rental properties is that demand will never end. Because people will always need a place to live, real estate is an investment that will last. Some of the most successful people have built their portfolios with long-term rental properties. And, while this will not give you the same instant gratification that flipping a house will. In five to ten years, it could be the best investment you ever make. If you buy today, with an eye on the future, you often see a greater return down the road.

Multiple Ways To Profit

One of the greatest benefits of rental property investing, is the opportunity to capitalize on all four of real estate’s major profit sources. Cash flow, appreciation, the loan pay down, and the tax benefits. Some people look at rental properties solely as long term holdings. Under this scenario, the monthly cash flow may not be as great, as flipping a house. But, by using your tenants to pay down your mortgage, and increase your equity, there is a strong upside to investing in a long-term rental. The most common way real estate offers a profit, it appreciates. That is, it increases in value. However, betting on appreciation alone is not a good idea. Rental purchases should have positive cash flow and good rate of return. 

Cash Flow

One of the most important considerations when investing in a rental property is to accurately estimate rental income and your expenses. Your monthly expenses will include the mortgage or debt service, taxes, insurance, lawn and pool maintenance, property management (optional) and insurance. Remember, a rental property can be a great source of income. But it can also become a huge headache! Simply stated, the profit, or return, you make on your real estate investment must be enough to cover your taxes, utilities, regular maintenance, and insurance. With this in mind, we offer you some insight.

A Guide For Investing In Rental Property

For long-term equity growth, a rental property in a good location is key. Since real estate is all about location, it’s no surprise that it is one of the most important considerations when purchasing a rental property. Take location, size and amenities into consideration. Research rents in the area you want to pursue, both in as-is condition and with repairs or improvements.

Location

Look for proximity to major roads, public transportation, schools, entertainment and shopping. In a nutshell, location, location, location means identical homes can increase or decrease in value due to location. Repeated three times for emphasis, it is the number one rule in real estate, though it is often the most overlooked. Don’t make the mistake of buying the right home, in the wrong location. The neighborhood that you choose determines the future of your real estate investment and whether it will be a successful investment or not. 

From City To Neighborhood

Say you want to invest in The Movie Colony Palm Springs, CA. This area lures people from all over the country. In fact, some of Hollywood’s biggest stars live here. Of course this is not enough to define this neighborhood as the right investment area. You still have to do an analysis of the area. Remember, proximity to amenities, peaceful conforming areas, neighborhood status, scenic views, etc. are all major factors for residential property valuations. There is no such thing as a “lucky investment” or a “magic formula” for a successful real estate investment. To be successful, conducting a thorough real estate market analysis before determining the best investment is a wise thing to do!

Don’t make the mistake of buying the right home, in the wrong location…

Buying A Rental Property

It’s often said that buying a home is a good investment. Taking it a step farther, purchasing multiple houses as rental properties can also be a great way to increase your assets and make money. When looking at rental properties, location is often the biggest factor in appreciation. As the neighborhood around the home evolves, adding transit routes, schools, shopping centers, playgrounds and so on, the value climbs. The fixed amount per month your tenants pay will go up with inflation and demand. Buying a house as a rental property is not a get-rich-quick scheme, but a long-term investment that may yield good returns over time.