We See the Green
As real estate investors, there is one thing in specific we are pretty good at seeing. It is the green. By green, we mean the cold hard cash flow you get from owning a residential rental property.
When you are investing in residential real estate, you can expect a stable rental income if you play your cards right.
And if you manage the investment property correctly right from the start, oh boy, can you expect rental income flowing into your bank account. Here, we give you a quick lesson on what rental income is, to begin with. We also included some ways you can make rental income when you choose the residential real estate investment strategy.
Open your books, students, the class is in session.
Mashvisor Dictionary Mode
We like to call ourselves teachers sometimes, so as your instructor, we want to start off by giving you some of the definitions you need to know for this lesson. We would hate to throw a bunch of concepts at you without letting you get to know the definitions first. So, here they are!
Residential Real Estate
When we say the word “residential real estate,” we refer to properties that you purchase that inhabit tenants on a lease or rental agreement. There are a number of different real estate property types in the real estate business. Some of them include single-family homes, multi-family homes, apartments, duplexes… you get the point.
If you are putting a roof on top of an individual’s head, you are a residential real estate investor. With investing in residential real estate comes great responsibility, and well, great rental income. Although you play the role of a landlord and may even engage with a property management company, you are able to see the cash coming.
To learn about the best ways to make rental income, click here!
Rental Income
When you own an income property, you have the aim to earn income. Whether it is through renting, leasing, or price appreciation, you want to see the green! Owning a rental property allows you to see the green, especially when it comes to income from renting out to your tenants.
In the simplest of terms, rental income is how much money you are collecting as a landlord from your tenants, or group of tenants, for living in your investment property.
Being a Landlord: Is Earning Rental Income for You?
We both know there is a good amount of income-generating assets to go around, but how do you know if earning rental income as a landlord is for you? Like we mentioned before, owning an investment property comes with a whole lot of responsibility and a whole lot of rental income. So, here are a few questions you can ask yourself to see if you’re up to earn some of that rental income.
Are You a “Do It Yourself” Type of Person?
This one may seem random, but it can save you in the long run. It’s good to be the type of real estate investor who is considered a pretty “handy person.” Light plumbing, minor construction projects, yard work, and the like are all good skills to have as a landlord. Being able to handle some of the minor work yourself will save you from expensive contractors. This is especially helpful when you want to turn that rental income into actual profit.
This doesn’t mean to neglect all types of external help. Professional help should be sought when needed, it’s their job. However, if you have the skill set to do it yourself, rental income earning is within your reach. Doing the work yourself saves you money. We like saving money, right?
Networking: Do You Know the Right People?
If you have any hopes of growing as a real estate investor and expanding your “investing in real estate portfolio”, you need to be a talker. A networker. The best investment portfolio is beyond just one or two locations. If you have any hopes of owning the most profitable investments and earning profitable rental income, you need to expand fast. We love improvement and growth as real estate investors, as it means we are doing something right. However, it could potentially get to the point where you won’t be able to handle every bit of work yourself.
Knowing trusted contractors who are open to negotiations means discounts, enhancing your rental income profit. Everyone loves a good bargain, especially real estate investors like yourself. Building relationships with those contractors to the point where negotiation is on the table takes time. It isn’t just an over the night process.
This applies the same way for real estate agents. Once you built the connections with individuals of that business, you open up a number of channels you will benefit from. For example, you will have better access to potential tenants, lowering those advertising costs, keeping that rental income in your pocket.
Having a good name is crucial in the real estate business, and getting to know the real estate agents that work alongside you will only benefit your cause. You are just removing the obstacles you may face before you even get started. You work smarter as a real estate investor, not harder.
Do a little exploring and get to know different people. Starting in the real estate business with these important relationships already formed puts you ahead in the game.
Setting Rental Rates: How High Can You Go?
It’s no surprise that some US real estate markets of monthly rental properties are extremely competitive. This can cause prices to stoop down, decreasing that rental income profit we are trying to keep up! You may find yourself competing in an area where most investors own their investment properties outright, no mortgage.
This will be like putting handcuffs on your wrists, as you have less pricing flexibility than your competitors. Charge high enough rent where your expenses will be covered while still allowing you to take home some rental income profit. Be a part of the US housing markets that allow you to set higher rental rates. For example, head to parts of the country where you can rent properties that command rental fees of $1,000 or more if you want a rental income of just over 6 figs. Let’s say you pay a monthly mortgage payment of $350, and the rent you successfully charge is $1,000, your path to earning that profitable rental income has just got much less rocky.
Time, and volume-two things that can easily exceed that $50,000 annual earning. Choose the right places, do your research, and choose wisely. Think 100 steps ahead before you make a decision, it could be the fine line between a positive cash flow property and a negative one.
Want to know what how to avoid losing rental income? To read about the worst ways you’ll lose the precious green, click here.
Your Lesson Outline
We explored rental income and how to know you’re a good fit to start earning the profit, so where to next?
Class Is Dismissed
We have completed our lesson for the day, and it looks like you’re off to a great start in real estate investing. You want to aim to be the top of your class and earn that 4.0 GPA in real estate investing. Knowledge is needed more than formal education. Experience is needed more than the title.
What we’re trying to say here is that being the most successful real estate investor is within your reach. You are fully capable of making the rental income you set yourself to make, so go out there and make it.
