If you are considering getting into the real estate business, one thing is certain, you are here because you want to make money and establish a stable source of income. It might be overwhelming for anyone starting out with no prior knowledge or expertise on the matter, but fret not, we give you the ABC of real estate investing to get you started. For starters, you, as a real estate investor, must make a choice between short-term and long-term rental strategy. Both strategies have proven successful, but depending on your financial resources and location, one can trump the other. Smart investing starts with recognizing an opportunity and conducting the right research and due diligence to grow your real estate wealth and portfolio for the long haul.
Real estate investing is never made on a whim, and most successful investors have figured out the best methods to find the right property at the right price. To speed the process of real estate investing, Mashvisor gives investors access to find the best positive cash flow properties in an instant, including cap rates, cash on cash return, a heatmap generator, an investment property calculator, and much much more. We give you real time data analytics and key metrics necessary to find the right property in the right neighborhoods for both traditional and Airbnb rentals across the country.
Whether you plan to invest in a single family home, a condo, a vacation rental, or even your own home, you must conduct cost benefit analysis on the market as well as the property level to ensure good return on investment. And make sure to choose a prime location, first and foremost.
Short-term or long-term rentals real estate investing?
Both real estate investing strategies have advantages and disadvantages, but one rental strategy might be more favorable given the location and financial resources at hand. Some opt for short-term Airbnb rentals for one night or a week, while others prefer to invest in a single family home and rent to the same tenant for a much longer duration.
What is the difference between short-term and long-term rentals real estate investing?
In a nutshell, a short-term rental strategy entails renting out a furnished home, an apartment, or a condo for a short period of time. The owner of the property will rent his/her home on websites like Airbnb when he/she is not using the space. Moreover, many investors have bought investment properties for the sole purpose of renting them out on Airbnb. If you are in a desirable location with a high number of tourist visits throughout the year, then you should consider short-term rentals as a business opportunity.
Peak periods like Christmas and New Year trigger spikes in occupancy rates and rental income. During low season, occupancy dies down as well as your profits. It goes without saying that the Airbnb business has surged in popularity in recent years and in turn fostered a competitive business. With that in mind, you must create your own competitive advantage to get high demand for your property as well as to cultivate positive reviews.
Due to the high tenant turnover and the strong competition, you must maintain a high level of maintenance and upkeep to attract tenants. People are visual, and it is crucial you have an eye for detail and a nice interior design. Short-term tenants are more demanding and have higher expectations, and it requires that you provide more amenities than for long-term tenants. Many short-term landlords go out of their way to enhance the guest experience to stay competitive; for example, stocking the fridge with goodies is a popular one.
For long-term rentals, landlords rent out a real estate property for a longer duration of time to secure a steady flow of rental income and gain an appreciating asset over time. Traditional real estate investing poses less risk and gives landlords more financial security and stability. If you choose the right neighborhood and select the right tenants, you are in a better position to mitigate the risk of vacancy for a long time.
To avoid the risk of vacancy, make sure you conduct the right screening tactics and run background checks for potential tenants. Becoming a landlord is not a passive job, and there is a lot of logistics involved to maintain the state of the property as well as to keep your tenants happy.
Essentially, your tenants are paying off your mortgage payments and allowing you to enjoy the tax benefits involved in running your real estate business. It is imperative you maintain a good relationship with your tenants and listen to all their needs. Hiring a property manager is a great idea, but it comes at a cost. If you can afford it, we highly recommend you hire a professional property manager to take care of your real estate business.
Tips to get you started in real estate investing
1. Don’t give up your day job just yet! You need a steady source of income to be able to save money for a down payment and be able to obtain financing to buy rental properties.
3. Acquire as much knowledge as possible. Info is free and readily available. You won’t have anyone spoonfeed you with the necessary information and advice. You have to take the initiative to familiarize yourself with basic real estate investing terms and principles from the get go.
4. Stay away from high vacancy areas and run-down neighborhoods. Buy real estate properties in developed neighborhoods surrounded by school districts, shopping centers, and public transportation. Stay away from areas with too many foreclosures, empty properties, and dangerous neighborhoods.
Real estate investing is the way to go, and many are reaping the financial benefits in return. Improve your credit score, save up for the down payment, secure a bank loan (with a reasonable interest rate), and buy your first rental property. Find your real estate opportunity in a prime location and consult a real estate agent if deemed necessary.
Head over to Mashvisor to kick start your real estate business now!