If you’re living comfortably and are looking to invest, you’ve probably researched all the best investment opportunities and stumbled across rentals. As long as you choose the right property and offer it for the right rental price, your investment in profitable rental property should pay for itself in no time.
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According to Statista, more than 40 percent of non-homeowners don’t have the necessary funds to purchase a home. That means they’ll continue looking for fairly priced rental properties until they can build up savings. With this amount of demand in rental market, there are steps you can take toward finding and creating a profitable property investment for yourself.
Commit to Being Hands-On or Finding Help
Becoming a landlord isn’t passive income, so you have to either make yourself available 24/7 or hire a property management company. This is important to decide from the get-go since the cost of hiring a management company is going to eat into your potential profits; on the other hand, having to take care of repairs yourself can be extremely difficult on your finances, and there are specific actions you can and can’t take as a landlord. Think carefully about whether you have the time and resources to rent out a property yourself or if having help will be the better choice in the long run.
You must manage your property effectively for your investment to pay off. If renters don’t receive the attention they need within the time allotted to you under local and state Landlord-Tenant laws, you could lose a lot of money and even be taken to court. Before anyone becomes a tenant on your property, both sides will sign a lease, agreeing to any agreed-upon responsibilities within the lease.
Find a Property That Fits Your Budget
The first step is to secure a preapproval from a lender or even a prequalification. Since you’ve already decided to invest in a property, you should have an idea of a mortgage payment that will work for you; however, it’s ultimately up to your lender, who is funding the loan.
Investment properties are riskier for lenders to fund, and you have to be prepared for a stricter process. If you own your own home and are attempting to fund a mortgage on an investment property, lenders often require that you provide proof of enough cash reserves for up to six mortgage payments for each property, according to MoneyUnder30.
Start Shopping for Neighborhoods
First, search for homes in areas full of amenities to draw renters in, and focus on properties that are in decent shape. You don’t want to go through the trouble of securing funding on a property that you’ll have to do serious renovations on before renting it out.
If your property is in a safe neighborhood with a good school district, public transportation, and everything a renter could need, you’ll be able to charge top dollar. Plus, a property in this type of neighborhood has a good chance of appreciating over time.
Every neighborhood draws a different type of renter, so make sure you learn about the surroundings to enhance your odds of bringing in the right person. Review average rents in the neighborhood and calculate how much your monthly rent will be. Bringing in the wrong tenant can be a costly mistake, so be sure to screen potential renters carefully.
Profitable Rental Property: a solid income source
If you can handle the ups and downs of investment properties, a rental could be a solid source of income for you in the long run. As long as the numbers make sense—don’t forget property taxes!—a rental can maximize potential earnings. This way, you can reap the rewards of smart investing for years to come.