People are looking for ways to diversify their portfolio, plan for their retirement by earning passive income – and a lot of them are venturing to real estate investing for its potential to earn money while preserving their capital. There is a handful of real estate investment types that could potentially provide high rewards while minimizing the risk for investors. While there are a lot of them, the most popular and perhaps the easiest to learn and manage real estate investment is the property rentals.
Property rentals, if done right can create an ongoing income stream with very little risk. In addition, property rentals also work very well for those who are preparing for their retirement. In a nutshell, there are lots of benefits to it as a form of investment, and Paula Pant of The Balance has compiled some of the best benefits investors could achieve in property rentals.
Rental Property Return Investment Tips
More and more people are getting started in real estate investing and are looking to rental properties as a way of diversifying their investments and securing cash flow for the future.
The Benefits of Rental Properties
Rental properties can round out an investment portfolio and create an ongoing income stream. Several major factors have made this a popular investment option:
- Many people are dissatisfied with the meager returns provided by their savings accounts and investments such as certificates of deposit, causing many people to take a closer look at rental property investing.
- Several years of record-low interest rates have made people wary of future inflation, which drives them away from the bond market. As an alternative, people invest in commodities like real estate, which contains perceived inflation-protection.
- Many want to diversify their investments, which means moving away from solely investing in the equities/stock market.
If you want to get into rental property investing, you need to learn how to evaluate whether or not a potential rental property is a good investment. The following two formulas will help. Learn more about the rental property benefits here…
Property rentals are seen by experts as one of the best investments and portfolio diversification strategies, much better than stocks or bonds. Renting a property also a low-risk type of investment since you can keep the ownership and continue to get income from it as long as tenants are renting the property, which in turn makes it a high reward investment instrument. However, if you plan to become a landlord, one must learn how to evaluate whether a property is actually, a good investment at the same time know how to screen good tenants fro the bad ones.
Despite the success stories of those who have been into property rentals for many years, there are still those who doubt its potential. Well, to debunked these doubts about the potential of property rentals, Paul Sydlansky wrote an article in Kiplinger.com answering the ultimate question “Is rental property a good way to grow your wealth?” Read the article below to know the answer.
Is a Rental Property the Best Way to Grow Your Wealth?
Owning a rental property in addition to your primary residence can be a way for you to build wealth, especially if you may be averse to investing in the stock market. Data released in 2017 shows that 47% of rentals were owned by individual investors. In theory, it seems to make sense. With a rental property, someone else pays your mortgage, and over time your equity grows. You can eventually own a physical piece of property outright that also produces income. However, rental property investments aren’t always a sure thing.
So, as you can see, things that seem too good to be true often are. So, before you decide to invest in a rental property, consider calculating the return on your investment to see if investing in a rental property is really the deal you thought.
How to Calculate the Return on Investment of a Rental Property
Like any investment, you need to understand the expected return on investment (ROI). ROI = (Net Profit/Cost of Investment) x 100. Therefore, before you purchase a rental property, ask what return is reasonable to expect on your money, and what do you need to earn in order for the investment to be worthwhile?
Calculating the ROI of a rental property can be complex. While there are many different ways to do this, the point of this exercise is to provide you with a “back of the envelope” calculation to help you quickly assess whether or not a rental property has a return potential that is worth pursuing. If your calculation reveals that the return is small on paper, it’s likely going to be small in reality, too. Read full article here…
Indeed, property rentals could be a great way to build wealth, earn passive income or build retirement funds through it. However, you need to do some research to become successful such as computing first the investment’s ROI before even starting purchasing the property (if you plan on buying a property for rental business) and posting it on different listing sites. Also, revenue does not come overnight. It also requires a tremendous amount of patience and minimizing the risks that might affect its profitability.
You need to have strategies as you start your journey into property rental investing. In case you need some help in formulating some, check out this article written by Erin Eberlin in The Balance about the effective strategies for managing property rentals. Check out the article below.
Strategies for Managing Rental Property
If a rental property is not managed correctly, it will fall into shambles. Luckily, there are several different ways to manage property to fit every landlords’ needs. You can be completely hands on, or you can decide to outsource everything. Here are three management strategies for every potential landlord to consider that will keep your property up, running and generating revenue.
3 Strategies for Managing Rental Property
Before you are able to select the right strategy for you, you need to understand all the different areas of a rental property that need to be managed. A landlord’s management responsibilities can be broken down into three sections:
1. Managing Tenants
This is the part of rental property management that is most immediate and most obvious. However, being a successful landlord involves a lot more than just collecting rent.
2. Managing Property Maintenance and Inspections
The second main part of rental property management is the property itself. The physical structure needs to be maintained for the health and safety of the tenants. Your insurance company may also require certain parts of the structure, such as the roof, to meet certain standards or they will refuse to insure the property.
Your strategies will be the vital factor that leads you to success in property rentals. Thus, you need to formulate strategies that suit your personality, knowledge, skills and risk tolerance. You can have those strategies mentioned above as your guide, working your way through it until you formulate your own strategies.
If the purpose of you investing in rental property is for passive income and plan on managing it on your own, then you must consider these tips written by R.L. Adam in Enterpreneur.com about real estate property management tips for those entrepreneurs seeking passive income.
Property Management Tips for Entrepreneurs Seeking Passive Income From Real Estate
If you’re a landlord or just looking to make money with real estate, it’s crucial to understand how to manage a property the right way. It’s not just about knowing how to fix things when they break. As a property manager, especially as a first-time landlord, you’ll be forced to wear many hats. How you manage that property is going to either make or break your chances for success.
Entrepreneurs have become obsessed with rental property and not just long-term rentals. The rise of AirBnB, and the eager rush to convert condos and homes into short-term, transient rentals has the real estate world reeling. If you’re looking to get into the fray, heed the advice from property managers who are dominating the short-term rental game.
While short-term rentals are on a steady rise, long-term rentals have also long been a source of the Holy Grail of all income: passive income. Real estate is a prime example of one of the >best ways that we can create a passive income from a real-world asset that increases in value over time. The best part? Even if you put 15 percent or 20 percent down on a property, you still receive 100 percent of the rental income. Music to your ears, right?
Well, what’s not so obvious or straightforward is particularly how you go about managing that property. If you don’t have the time, no problem. Find a good, local property manager that can take care of all the details for you. If you have the time, and you’re just starting out, then you likely want to save the hefty fee that often comes along with property management companies that take the reigns. But, you better be prepared to put in the time, because you won’t find this easy to do.
Apart from formulating foolproof strategies, landlords must also learn how to effectively manage your property rental to maintain its good condition. How you manage your property could either make or break your success in this field. If you can’t handle the repairs on your own, you can always hire professional services to get the job done.
Investing and managing property rental is a two-bladed weapon. Its potential to earn big while preserving capital is very high, however, you need to completely minimize the risks to maximize its potential. Screen tenants thoroughly and do maintenance works as soon as the problem arises. Now if you’re already fixated on investing in property rental and you’re looking to purchase property for that purpose, then Dependable Homebuyers can help you find the best property for rentals. They are experts in finding the best home deals in Baltimore, Nashville and other areas. To learn more about them and their excellent service, visit their website https://www.dependablehomebuyers.com and get started on becoming a successful landlord.