Determine if it's right for you
Typically, owners of rental properties save money by doing their own repairs. If DIY isn't your thing, consider if you can afford the cost of outsourcing work to cleaners, handymen and contractors. If you have any debt, make sure that the return from your investment in the rental property is greater than the cost so that you don't put yourself in a position where you lack the funds to be able to make necessary payments on your debt. Always have safety margins!
Calculate the costs
According to Kiplinger, rental properties can generate income, but the return on investment doesn't typically happen right away. Make sure that your mortgage payment won't eat into all of your monthly profits, estimate maintenance costs and necessities including insurance, tax, monthly expenditure, and any homeowner's association fees.
Avoid a fixer-upper
If this is your first property, unless you’re able to handle the home improvements yourself, it's better to look for a property that is priced below market value and needs minor repairs. Find a property with low taxes, within a good school catchment area, with low rates of crime, and plenty of parks and restaurants. Create, manage and store property inventories and right to rent reports by investing in property inventory software. Property inventory software can help you stay on top of all of the little details.
- After your initial investment, the income becomes passive.
Your investment should rise in value as real estate value rises.
- Real estate is well known for being more stable than a stock market investment.
- Renters can be difficult to deal with unless you have a property management company.
- Real estate is a long-term investment and can be difficult to get out of.
- Most of the time, you can't sell sections of real estate. It’s all or nothing.
- Costs for both entry and exit are high.
- If your place isn't rented, you have to pay for all expenses.
It’s important to be realistic with your expectations. Rental property is a lot of hard work but investing in property inventory software can help.
Consider working with an expert on your first property to learn as you go!