Where do I begin!? The short guide to investing in rental properties!
Investing in a rental property has been a very lucrative business for many investors that can provide you with a steady and consistent cash flow. The Key to being successful in this business is becoming familiar with the process of buying an investment property.
How do Investment properties make money?
Landlords who rent out their properties make money when their tenants pay rent and whenever the property’s value appreciates. There is also tax advantages for rental property investors!
Positive cash flow
This is the main goal of any rental property investor! This will require you to calculate the net operating income. This means reviewing the total rent coming in minus all expenses. The result of this calculation should be a positive number. Some expenses to consider are-mortgage and interest payments
-property management fees
You will benefit from certain tax advantages when investing in a rental property. One is through depreciation. This allows owners to offset maintenance and expenses as well as mortgage interest.
Some investors plan to hold on to their property for a certain amount of time, in hopes it will appreciate so they can sell at a profit. However this is not guaranteed. Something that may effect this include, population growth, fixed supply and equity.
Every month that you collect rent those funds contribute to the paying down of principle mortgage. So over time more equity is built up as the tenants rent payments, pay down the principle.
What to do before investing in rental property
1. Evaluate your personal finances
2. Start at the bank
3. Research potential areas
Personal finances: though this can be a very lucrative investment, it can be recommended to have at least 6 month in bills in case of emergency.
Start at the bank: Often times banks will have a difference process when it comes to getting a mortgage for rental or investment properties. It is smart to start with talking to your local banker to see what that process entails.
Research you’re area: when researching your desired area some factors to consider include average rental rates, how many competitors are on the market. Which neighborhoods will be the most lucrative, the schools, crime rate, and job opportunities?
Investing in a property management company
Very successful property managers rely on a property management companies to handle the day to day dealings of owning a rental property. This will ultimately save you time and money. Some benefits that are provided by property management companies include tenant screening, market properties, rent collection and property maintenance. So if you own multiple properties it may be hard to juggle all your properties on your own. That’s where we come in.
All County Property Management offers comprehensive rental management services for our property owners. Call us today to see how we can best help you in owning a successful rental property.