Buying a property to rent it out is certainly a tempting prospect these days with so many distressed listings and foreclosed homes. So you’re wondering: why not invest in the gold mine that is real estate?
Demand is built into real estate because everyone needs a place to live. And real estate offers not one but two income streams: cash flow and appreciation. Cash flow is just rent that (hopefully) exceeds total expenses while appreciation is increased value over time.
Don’t think of real estate as an easy-going gold mine though since it has many times demonstrated great swings up and down. You will have to invest time and effort into finding a suitable property since there are a lot of variables that go into buying a home.
Best for You?
You’ll have to decide if this is the best investment for you since there are always an array of options. You can get creative when it comes to real estate and even just buy to let if you’re unsure of the market at first.
Find Properties in Good Locations
When you’re ready to look at properties, keep in mind that your potential tenants want high quality neighborhoods. Consider also that high quality is what keeps tenants happy in the longer run. But your tenants don’t want just a comfortable home. They also understandably want nearby amenities such as good schools, parks, shopping and perhaps even public transportation.
Types of properties
Some people like to invest in multi-family properties that are already making money. Others will live in a duplex and rent out the other unit to defray or even cover the mortgage. Still another option is buying a vacation home. That alternative lets you rent it out weekly or monthly or as a summer home while you live there the rest of the year.
Are You Mr. all-Thumbs or Mr. Handyman?
You might buy a property in a good neighborhood that needs repair. If you’re handy and like doing fix-up work, you can make the repairs and sell it for a profit, or keep it for a rental. Many landlords prefer using agents. They charge various management fees but relieve you of those midnight calls to fix the plumbing or patch a leaky roof.
How to pay for it
Few investors these days have the money for a down payment and are even poorer prepared to pay closing and insurance costs, among others. So the likelihood is that you will need a loan. You won’t just waltz into a bank and ask for a mortgage, make sure you shop around for the best deal.
Planning for Problems
Track All Your Accounts With Personal Capital
Personal Capital lets you see all of your accounts in one convenient place. Sign up now for free.Say your property sits idle and unoccupied for a month…or several months? What is your fallback plan? How long can you afford for that to happen? You should have emergency funds available to cover any repairs or expenses that may come up.
Leave a Reply