Many real estate investors began their journey with one rental property and climbed the ladder until becoming tycoons that made millions through smart real estate investments. Beginner real estate investors are always wondering how to make money in real estate. A young real estate investor might buy a rental property to carefully plan a bright financial future for him/herself.
Buying income properties is a common investment strategy that demands less cash for initial investment but more effort on the real estate investor’s behalf. Considering that most real estate investors aim to buy multiple rental properties, the rental income generated from such investment properties is rewarding enough for the investors to keep pursuing it.
An income property is a property purchased for the sole purpose of generating income through renting. Investors opt for income properties as they offer the security of owning real estate.
What makes a rental property the ideal investment deal for you?
It has proved to work for others
Making money in real estate is not a recent discovery; millions of people made their wealth through investing in real estate. For a beginner real estate investor, all you need to do is follow the footsteps of other real estate investors to create your own success story.
Real estate is a necessity
Real estate investment offers stability and long-lasting demand. It is not affected by trends or fads in the market as people will always need a place to live.
It offers leverage
When a real estate investor decides to buy a rental property, he/she can borrow the money to buy the property and follow a payment plan. This makes investment properties very lucrative as real estate investors don’t have to pay the property’s value at the time of the purchase.
Related: 8 Reasons Why Rental Properties Are the Best Income Investments
What do investors need to know before diving into real estate?
Making money in real estate can be done through conventional methods along with non-conventional ones. Listed below are several things you need to be familiar with before buying a rental property:
Factoring in unexpected costs
Whether your property is an Airbnb rental or a traditional one, you need to factor in the unexpected expenses that arise with owning a property. Budgeting is a major role in a real estate investor’s life; you will need to factor in repairs and maintenance to fight the depreciation of your investment property.
Rental properties require a higher amount of maintenance to keep them in top shape. It’s important to figure out the solidity and maintenance history of the property and factor it in the property’s price.
Choosing the right location
The better the location of the investment property, the more money it will yield. Simple. Location sets the type of the property and how it will attract tenants. It will determine the type of tenant who will call your apartment a home. When it comes to Airbnb rentals, a central location near public transportation or a tourist attraction is a winner. However, this may not be the case for a family looking to rent a home in a quiet neighborhood. Along with the property’s price, rental income is affected by the property’s location.
Choosing the right location is the first step to making money in real estate. So, choose wisely and stay well informed about every decision concerning it.
Related: Should Real Estate Investors Consider Moving to a New Location in 2018?
Running an investment property analysis
Running an investment property analysis will tell you more about your property’s value than just numbers; it offers a guide to the possible outcomes when buying a rental property. Mashvisor offers an all-inclusive rental property calculator; it consists of metrics such as the cap rate, return on investment, and cash flow. This helps real estate investors get a clear idea of the property’s situation currently while addressing expected values in the future. Mashvisor also offers a comparative market analysis with high accuracy to make sure that real estate investors are paying fair prices as other similar investment properties have sold for.
Conducting such an analysis has become available and easier to access for real estate investors through technology. It helps real estate investors get an estimate of the property’s future value.
Becoming a landlord is hard
Whether you are a traditional landlord or an Airbnb host, it is a difficult job to perform. A real estate investor will have to screen tenants’ applications to choose the right tenant for the rental property. You would have to be ready for any emergencies that might occur within your rental property and act responsibly. Although many new real estate investors are afraid to set the rules up front, things would go a lot more smoothly if the landlord set the rules and adhered to them.
Related: Be a Real Estate Investor, Not Just a Landlord
Assume a hike in property tax
Property taxes can vary depending on the type of property. Real estate investors must evaluate the costs and taxes to come up with a profitable property, especially when financing the rental property through a lender. Real estate investors are required to do a lot of budgeting to guarantee the property is making a handsome rental income.
Related: Invest in Real Estate in These States With No Property Tax
Making money in real estate is attainable but hard. A real estate investor is required to invest both money and effort into his property to ensure profitability. A rental property’s overall features determine how lucrative of a real estate investment it is. You must think with your head not your heart, meaning that you need to run your rental property as a business; this includes raising rents and making sure that tenants are treating your property well. As a new real estate investor, wondering how to make money in real estate should be a constant thought as you will need it to keep up with the changes in the real estate market. You will encounter problems of your own; ensure you deal with them professionally and give every decision a deep thought in order to reap the treasure of your investment property.
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