You don’t have to be a major investor to start investing in property. In fact, 77% of rental properties in the US are owned by independent, “mom and pop” landlords.
That being said, investing in a rental property isn’t as simple as buying a house or condo and listing it for rent. There are certain things you should know before you dive in and buy property that isn’t for personal use.
What should you know before you invest? How can you determine if now is the right time–or if you’re cut out to be a landlord?
Read on for a quick guide to the most important things to consider before investing in a rental property.
Owning a Rental Property Isn’t Passive Income
There is a misconception amongst new investors that owning property generates passive income. This isn’t the case for most landlords who own a handful of small properties.
Someone has to take care of your property. You have two choices, but you need to expect to pay up in either time or money. A property management company can take care of your properties and tenants for a fee or you can take care of it all, yourself.
Check the Real Estate Market Before You Invest
Admittedly, property is considered one of the more stable investments you can make. After all, people will always need housing and the cost of housing is almost always on the rise.
However, this is not evenly weighted across the nation. Make sure you research your local housing market, first. Take a look at things like the demand for rental homes and apartments, the average rent landlords are charging, and the typical turnover rate to make a more informed decision.
Don’t Invest in Property to Pay Off Debt
Nowadays, millions of Americans are looking for ways to increase their income in order to pay off debt. Investing in rental properties isn’t the best way to do that.
There are a tons of surprise costs that come with purchasing property. You can expect to pay for routine maintenance, but what about emergencies? What about renovations you didn’t realize were necessary in order to bring up the value of your rental?
Becoming a landlord is a lot like starting any other business. You should expect to be in the red for at least a few years. Don’t anticipate using rent money to pay off debt when purchasing a property could throw you into more debt for a period of time.
Is Property Investment Right For You?
Investing in a rental property isn’t a bad idea, but there are things you should consider before you do it. The more you prepare for setbacks and risks, the more success you’ll see in the long run. Make sure you’re poised for success before you dive in and invest.
Do you think you’re ready to start purchasing rental properties? Take a look at our real estate news and tips to find out more about how to get the most out of your investment properties.
