With today’s economy, many people are looking for options to create steady income. An excellent opportunity is with rental property investment. In addition to ongoing income, this also allows the buyer to build equity, make this an excellent investment option. When done right, it is quite possible to enjoy a good return on investment. The one thing to remember is that being the owner of a rental home is not going to make you rich overnight. Instead, this investment is a tool that can lead to financial success. However, you want to invest in the right properties, those that would be worth the time and money.
Having the chance to create a means of income is appealing and then when you consider that as the owner, the rental property would provide tax breaks for expenses associated with property maintenance and renter troubles, you can see why this is often a great purchase. In some instances, a person could purchase a home, rent it, and use the rent money for paying the mortgage loan, which is known as “free equity.”
Just as you could make money with rental property, the income is not without work attached but it does offer flexibility. If you wanted to take a much needed vacation, the money for the home would continue to come in even with you gone. Depending on the type of repairs, you may need to hire a professional but if you were good at fixing things, then handling the maintenance on your own would be a real money saver. Another consideration for rental property is deciding if you want a property management to assist. This type of company would spearhead certain situations, such as emergency calls from the renter in the middle of the night.
When choosing property to rent, stop and consider the type of accommodations, size, and features that would attract quality renters. Often, a home located within a short distance to restaurants, shops, and entertainment is much easier to rent than a home far away. For college towns, finding a property close to campus would also be beneficial or if you want your property to appeal to families, then property by schools would make a difference.
Just as the rental property should be near good things offered by the community, you want to avoid locations that would be considered distracting. In this case, a home close to a railroad, in the airport’s flight path, or loading docks that operate around the clock would not be appealing to many people. One of the best ways to determine if the rental property is in a good location is to visit the area during various times of the day and night.
As a property owner, you can expect to be faced with all types of situations and challenges, which is simply the nature of the beast. Chances are you would be dealing with a real estate agent or broker in finding the best investment property, for loan approval, the home would need to be inspected and appraised, and you should work with a real estate attorney to have the renter’s contract created. All of these things would put you in a better position for being successful with rental property.
Obviously, the last thing you want is to purchase a rental home and take a shortcut on important decisions, which could lead to people living in an unsafe or even dangerous home and you being sued. Many people own pets so this would also be something to consider. Allowing pets would open up the number of interested renters but if you choose not to allow pets, the contract needs to be ironclad, outlining rental requirements, as well as consequences for not following them.
While it might take a little more time and effort, searching for the right renters would be to your advantage. Potential renters should go through an application process, to include checking references and even criminal background checks. People will swear they are good, honest, and will pay on time and keep the property in pristine condition but without the required investigation, anyone could tell you how great they are, only to turn around and do serious damage to your rental home.
You might be faced with the situation of having a family member or friend ask about renting your property. While you could certainly do this, especially if they were going through tough times, often this situation backfires, leaving you to pay the mortgage loan and getting nothing from the renter. All too often, putting family and friends in situations where money is involved results in family feuds and lost friendships. Therefore, if you decide to rent your property to someone you know, both parties need to understand and agree that this is a business deal, a means of income.
The truth is that owning and managing rental property requires hard work but it can also be a fun, gratifying, and lucrative deal. We recommend that you be realistic about your expectations as an owner of rental property in that this type of investment is not for everyone. You will invest money initially, have issues with renters, and need to maintain a clean and safe property but following a few rules could make this an exciting venture, one that provides a stream of income and significant equity.
Author Resource:
Allison Clarke is a real estate investor based in Texas. She is a former estate agent and writes widely about issues related to real estate and finance. His current interests are focused on the UK http://www.sellhousefast.co.uk market and how it’s been affected by their property crash.
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