If you are thinking about indulging in rental real estate investments, there are basic real estate strategies and instructions to learn and follow before you start dreaming about the money. The more information you gain about rental real estate, the smarter your decisions will be regarding your rental property business. Therefore, let us explore the real estate strategies you need to know before you start your journey as a rental real estate investor. Mashvisor is considered a wonderland when it comes to real estate subjects; find your answers by visiting our website.
Choosing the right strategy in rental real estate can be intimidating, but it is a necessary step that can save you from losing money. The road to becoming rich through rental real estate investments is not paved with roses and requires a good strategy. This post is dedicated to the novices of real estate, and will tackle the basics of rental real estate strategies.
To get you started, we will simplify the main four strategies you need to know about rental real estate to get your investment journey started:
1. The Cash Flow Strategy.
2. The Commercial Real Estate Strategy.
3. The Airbnb Strategy.
4. The Buy and Hold Strategy.
Cash Flow Strategy:
This strategy is ideal for beginners in rental real estate investments, who are looking for a constant monthly income apart from their main income. It mainly focuses on cash flow, and it comes into action when the investment property produces an amount of rental income bigger than the costs of the mortgage, interest rates, maintenance, and management.
– Because of the extra monthly income you will be enjoying through this rental real estate strategy, it will be possible to borrow more money to invest in further income properties.
– It serves as a financial comfort when there is a risk of losing your main job.
– The extra cash flow can help fix other investment properties of yours that need repairs to look rentable.
– There are lower tax deductions. This is due to the fact that the property will be producing an amount of money equal or more than your expenses.
– Rental real estate properties that depend on cash flow are usually located in areas that attract renters more than buyers. Therefore, the capital growth will be lower because the location of the rental real estate property will not help in increasing its value with time.
Related: How to Find Positive Cash Flow Properties in the US
Commercial Real Estate Strategy:
Rental real estate strategies are not limited to the residential side; you can always take advantage of the commercial side. As a real estate investor, you can own a building and rent out its floors and spaces to different businesses as offices and warehouses.
– There is higher income potential. Commercial rentals are preferred because they produce more money than residential ones, as the business rent can be higher.
– It is more professional. In this rental real estate strategy, the relationship between the owner and the tenant is more business-like, therefore it is more professional. Tenants in this scenario lean towards keeping a good reputation for their businesses, so they work hand in hand with the property owner to ensure that the property is kept in good shape, which preserves its value.
– There are fewer working hours. It is easier to run a commercial rental than a residential one because the working hours are regular; businesses usually work during the day and close at night. Therefore, you will be dealing with any phone calls from the tenants mostly during the day, whilst, in a residential property, you are likely to receive emergency phone calls from your tenants any time of the day and night.
– It is difficult to get started. Commercial real estate investments require more capital than residential ones. Because of the huge amount of money needed to get you going, there is also more risk that the costs might outweigh the revenue gains.
– You are with full hands. Dealing with commercial tenants is, of course, different from dealing with single-family homes tenants. That is because you have more things to manage since there are a number of leases you’re dealing with at the same time. Issues like maintenance and security are now double, triple, or even more the burden.
– You have more expenses spent on professional assistance. Commercial rentals require professional, licensed people to handle issues like maintenance, security, and management. This means that more money will be spent for these services.
Airbnb is an accommodation-sharing website that allows ‘hosts’ to list their properties as short-term rentals for ‘guests’ from different parts of the world. Airbnb hosts benefit from a good source of rental income that is usually better than what they receive from a traditional rental strategy.
– You face reduced risks. Short-term rentals are less likely to damage the rental property.
– You receive increased cash returns. Real estate investors usually enjoy cash returns through properties listed on Airbnb bigger than the returns via traditional rentals. The amount of money they charge per night exceeds what they get by night when renting an investment property on a monthly basis.
– You have to pay specific taxes on short-term rentals. Occupancy taxes differ from one city to another; this may result in unexpected costs for the renter.
– You face different regulations in different cities. Some cities set limits on the number of times short-term rentals can be rented per a year or the number of guests that can occupy the property. Some cities also impose limitations on short-term rentals in certain neighborhoods. To learn more about these regulations in your city, visit the Airbnb website or click here for a faster trip.
Related: How Do You Create The Best Airbnb Property in Town?
Buy and Hold Strategy:
Many investors consider this strategy to be the best real estate investment strategy. The ‘Buy and Hold’ strategy means that you buy a real estate property and rent it out for a long period of time, which results in monthly positive cash flow and long term appreciation.
– The cash flow coming from this strategy creates wealth and helps investors pay down their mortgage through the monthly payments.
-Any decrease in the property’s value won’t be severe. If your property’s value decreases, you won’t be largely affected as long as you do not sell the property. Any gain or loss in the value will only be noticed in case of a sale; otherwise, you will still be enjoying the monthly income.
– Investors might make bad deals. Incorrect evaluations made by the investors can result in buying rental properties for money that exceeds their value. This is due to the lack of research made by the new investors, which can also lead to miscalculations of the maintenance expenses as well as choosing the wrong tenants. Use Mashvisor to easily do your research and learn all the important strategies and methods, in order to start with strong foundation.
Related: The Buy and Hold Blueprint: Qualifying an Investment
The real estate investment world can make new comers feel lost. However, with the right guidance and research, you can learn the basics in no time. It is important to choose your first steps in the field correctly, because the chain reaction of any investment decision can result in financial losses you can do without. Although loss is a natural part of any investment field, you can always avoid repeating others’ mistakes by non-ending education. It is extremely important that you always read and talk to people with experience in the subject. Mashvisor can provide you with answers to your every question, so do not hesitate to start your real estate education here.