7 Important Facts That You Should Know About Earning money with Rentals

Thinking about purchasing an investment property?

Purchasing rental real estate requires knowledge of leasing, mortgage loans, tenant and landlord relationships, and property management. Buying real estate can be lucrative but, just like any investment, comes with benefits and challenges.

So You Want to Be a Landlord?

Buying investment property and acting as a landlord can be a good way to earn income, but requires a commitment of time and money. After choosing the right property, prepping the unit, and finding reliable tenants, ongoing maintenance is required.

Maintenance and upkeep costs can decrease your rental income. There’s always the potential for an emergency, such as roof damage. Investors should plan to set aside 1% of their property’s value for repairs.

Rental property owners can manage the property themselves or hire a property manager, who typically charges between 8% and 12% of collected rents. Although costly, a property manager can provide a wide range of services including arranging maintenance and repair work, screening new tenants, and handling late rent payments.

Additionally, rental property owners need to know the landlord-tenant laws in their state and locale. Both tenants and landlords have rights and obligations regarding security deposits, lease requirements, eviction rules, and fair housing laws.

It is important to protect a real estate investment. In addition to homeowners insurance, rental property owners can purchase landlord insurance, which covers property damage, lost rental income, and liability protection in case a tenant or a visitor suffers an injury as a result of property maintenance issues.

Buying a Rental Property

Location, Location, Location
A city or locale where the population is growing and a revitalization plan is underway often represents a potential investment opportunity. A neighborhood with a low crime rate, easy access to public transportation, and a growing job market may also mean a larger pool of renters.

When choosing a profitable rental property, look for a location with low property taxes, a good school district, and a host of amenities, such as restaurants, coffee shops, shopping, trails, and parks.

Online real estate property sites like Nomadrentalz.com provide information for investors including home rental rates and current investment property values. Airbnb.com provides investors with information on the going rental rates for vacation homes or condos.

Making Money in Rentals

Operating expenses on a new rental property will be between 35% and 80% of your gross operating income. If the monthly rent charged is $1,500 expenses are $600 per month, that’s 40% for operating expenses. Many investors use the 50% rule. If the rent is $2,000 per month, expect to pay $1,000 in total expenses.

Should I Find a Real Estate Investing Partner?

A real estate partnership helps finance the deal in exchange for a share of the profits.

Instead, you can ask your network of family and friends, find a local real estate investment club, consider real estate crowdfunding, or search for social media groups that target real estate investors.

So, What Is The Bottom Line

As with many investments, real estate rental property is often a long-term project. Yet, rental properties can be a lucrative way to invest in real estate and provide a passive, steady income for investors. Investing in rental property requires knowledge about tenant and landlord laws, leasing, mortgages, and property management.