If you are wondering how to make money in real estate, the answer is investing in rental properties. So, why should you go for rental properties when you want to be investing for income? Stay with us!
Investing for income: What are rental properties?
Rental properties are investment properties that are purchased for the purpose of renting out. These properties produce a rental income, and the profitability is measured by the cash flow they produce.
Related: Investing for Income? Real estate Is the Way to Go
Investing for income: Why invest in rental properties?
#1. Stable income
Sure enough, when you choose to invest in rental properties, you are actually investing for income. The profitability of your rental property is measured by the cash flow it generates on monthly basis. Moreover, you will get a steady income for the whole rent term. This is great news for long-term rentals landlords since they enjoy a stable rental income for longer periods.
#2. Pay off your mortgage
What would be better than financing a property with a mortgage and having someone else pay for it?! That is, in fact, exactly what you can do with rental properties. Take a mortgage and let tenants in, and the rent they pay you will take care of your mortgage payments. Just make sure to have your investment property occupied most of the time.
#3. Low-risk investment
Every business, in general, is associated with risk. However, the thing that makes rental properties a favorite for real estate investors is that this particular investment strategy comes with lower risks. Housing is always on demand, and the percentage of homeownership is declining over the years. Therefore, why not go with rental properties?!
#4. Easy financing
The number one concern for real estate investors is financing an investment property. It is challenging these days to get business financing due to the strict conditions. However, rental properties are one of the best real estate investments when it comes to financing. Wondering why? Easy! It is all due to the first three features we have mentioned before: Steady income, pay off mortgage, and low risk. These features have made it easier to apply for a mortgage to finance a real estate investing business.
#5. Passive investment
The good thing about rental properties, aside from investing for income, is the passive investment. You can choose to purchase rental properties while having others taking care of your business. Either you do this by investing in REITs, or you can even invest in real estate with a partner. You simply give your real estate partner your money to purchase properties and take care of the property management. All the while, you can sit back and enjoy a monthly rental income.
#6. Property appreciation
The rental income is not the only way you make money when investing in rental properties. Actually, what makes rental properties the best real estate investments is appreciation. The rise in the property’s market value over the years is always worth the investment. In other words, you are not only investing for income, but also for a long-term benefit when you sell your investment property.
#7. No education needed
Here comes the interesting part. We have always been told that in order to make money, we need to have a college degree in some kind of specialty. Also, we have been told that if you get a certain degree, you will only be able to work in the field of your study. Now comes the time for you to forget all that! Investing in rental properties does not require a certain type of education. It does not matter what educational background you come from, you can always get into real estate investing.
Investing for income: What rental strategies are available?
There are two rental strategies that you could go with when investing in rental properties. The first is Airbnb rentals, and the second is traditional rentals. Let us take a look at each one of them:
Airbnb rentals are basically short-term rentals. You rent out your room, apartment, or villa to guests. The renting periods, however, are short (a couple of days up to a month at most). This rental strategy is one of the best when it comes to how to make money in real estate.
Related: Become an Expert on Airbnb Rental Properties With This Guide
Traditional rentals are long-term rentals. They are also one of the best real estate strategies when it comes to investing for income. The average rent term is a year long, which means you have a stable income for the whole year your property is occupied. Moreover, the demand for housing is high, which makes it one of the best real estate investments. Keep in mind that there is the variety of rental properties that you can choose from. Multi-family homes, single-family homes, condos, and apartment rentals are only a few types of rental properties you can invest in.
Whatever rental strategy and property type you choose, always make sure it goes well with its location. As you will see in the next section, location is the number one factor that affects your rental income.
Investing for income: How to boost your rental income?
No matter how good your rental income is, there are always ways to make it even better. Here are our tips for boosting your rental income:
#1. Pick the right location
The right location is what makes rental properties the best real estate investments. Before buying a rental property, make sure you perform real estate market analysis. This will help you analyze the area as well as compare different rental properties within that area.
#2. Reduce your expenses
Reducing your properties’ expenses is also a good strategy to boost your rental income. For instance, try to keep your property occupied as long as you can to save up on marketing. Also, give up professional property management. Learn how to manage your rental properties and cut the property management fees.
Related: The Best Real Estate Investing Tips for Cutting Down on Your Expenses
#3. Apply proper improvements and charge extra
Investing for income also means that you should add some improvements to your rental properties. Some decorations as well as fixing any broken elements is important. However, we have talked about reducing your expenses, so make sure you do not overspend on improvements.
Another thing you can do is charge extra. Whether you rent out the basement or offer your tenants cleaning services, it does not matter. What matters is that adding some services might be a good idea as long as your tenants appreciate it.
#4. Take advantage of tax benefits
Investing for income is made better with the tax benefits. You must know that rental properties are subject to tax deductions. So, in order for you to boost your rental income, find out what tax benefits apply to your investment properties and use that to your advantage.
Finally, starting your journey in real estate investing is not hard with the right resources. Sign up for Mashvisor to learn all about investing in rental properties as well as becoming a landlord.