Anyone interested in creating passive income should consider the benefits of rental property investments. Even a single desirable property stands to generate a small fortune every month, which can prove extremely beneficial to your financial bottom line. However, while investing in rental properties can be a great way to earn money, landlords still need to put in the requisite amount of effort. Sure, property ownership may not put you through the wringer the same way a traditional job might, but this doesn’t mean your properties will manage themselves. Fledgling property owners who are eager to find success as landlords should consider the following pointers.
How to Invest in Rental Properties
If this is your first foray into rental property investment, it’s important to understand that not all investments are going to be equally profitable. Investing in the wrong property – or even the right property at the wrong time – may ultimately cost you a lot more money than it stands to make you. This is why it pays to exercise discernment when considering prospective purchases. For example, if you’re interested in buying existing properties, you should never commit to a purchase without a thorough inspection. Failing to have a property looked over by a seasoned electrician, plumber and various other building experts is liable to result in unpleasant surprises down the line. It’s also a good idea to consider how much passive income a property stands to generate versus how much it will cost to maintain.
Additionally, first-timers would do well to consult with seasoned real estate investors when learning the ropes of how to invest in rental properties. These individuals will be able to provide you with detailed explanations of what qualities you should look for in a property, pointers for reviewing rental applications and a bevy of cost-effective maintenance tips.
You (Probably) Won’t Always Have Tenants
Even if a property is located in a highly desirable area, it’s best to assume that it won’t always be occupied. The property in question may be well-maintained and offer a host of amenities, but not even this will preclude it from periods of vacancy. Granted, it’s possible that a particularly sought-after property will never be without tenants, but assuming this will be the case generally isn’t advisable. As such, you should plan for periods without renters, even if you don’t currently foresee any.
If you’re so dependent upon rent that several vacant months would leave you with no choice but to sell, this is a problem. Landlords should always have funds on hand for extended periods of vacancy, and failing to plan ahead in this area is unlikely to serve you well. With this in mind, take care to place a portion of the income you generate from rent into an emergency fund each month. This will help ensure that you’re able to weather vacant periods and won’t have to go into panic mode every time a property is without an occupant.
You Should Hang On To Good Tenants
You’d be hard-pressed to find a landlord who doesn’t have stories about nightmare tenants. As you’re likely to discover, people who are consistently late with rent and refuse to properly care for your property are a dime a dozen. That being the case, you’d do well to hang on to good tenants and incentivize them to stick around.
For example, if someone who always pays their rent on time and takes exemplary care of the property is unable to afford a rent increase, you should consider whether you truly wish to lose this tenant. After all, if this person is forced to move out, you may have an empty property on your hands for a while or wind up with a tenant who isn’t as timely with rent or as responsible in general.
Owning rental properties can be a highly rewarding venture. Depending on where you’re based and the quality of your properties, being a landlord can prove exceedingly profitable. Of course, this isn’t to say that all landlords are guaranteed success. There are a number of variables that determine how successful – or unsuccessful – your forays into rental property ownership will be. As such, all first-time investors would do well to brush up on the intricacies of rental property ownership.
