It can be very profitable to invest in rental properties. However, you do need to learn about the different rules and processes before you get started. Rental properties in particular are still overlooked by many investors, even though they can bring in an excellent return.
Try to see rental properties like a stock market. This is because most of us understand these and know that we need to spend money to make money. However, there are no guarantees at all that stocks will actually perform well. Similarly, retirement calculators work on a guess of when we will actually die. The problem is that if there is a mistake in this estimation and you actually live longer, your final years will be spent in poverty.
You also have to make sure that you don’t take too many risks. Real estate is always risky, but some more so than others. Try not to choose private real estate funds, fixer uppers, real estate development and tenant-in-common options. Indeed, with these options, so much can go wrong that you are likely to never see a return on your investment. A much better idea is to title interesting properties to yourself. Naturally, this means you need to take the time to do research and analysis, and you must exert due diligence. Next, you need to find a property that doesn’t require a lot of management or time. Avoid short term rental properties like vacation homes or student accommodation, or properties in bad areas for instance. You should look for properties that people with good credit profiles will rent for extended periods. You will only be able to achieve this, however, if you also commit to being a really good and respectful landlord. It is impossible to never have a problem with your property, but so long as you deal with issues quickly, this shouldn’t be anything to really worry about.
Generally speaking, it is easier to get started with rental properties if you are younger, particularly if you don’t have a lot of money to put down. If a bank is to provide you a mortgage for a rental property, they will usually want you to put at least 20% down. Unfortunately, 20% can be much too high, particularly if the property needs repairs as well. However, those who are younger can often get better deals on mortgages, as they have longer to pay them back. There is a lot more to real estate investing than this. Finding the property is an entire enterprise on its own. If you want to find a property, however, you need to have the time to do a lot of research and you must analyze your options. You also need to spend some time looking for a realtor that can represent your interest. Thanks to their help, you should be able to find properties of interest. You will then also need to learn about and research what it means to be a good landlord, which takes a significant amount of time as well. However, overall, it is time well spent.