Did you know that there are almost 20 million rental units in the United States of America? One of the best ways to grow your wealth and diversify your investments is through owning rental property. It might sound like a great way to get on the fast track to becoming a landlord and making tons of money but there are a lot of things to consider before you start renting out units.
When you’re the owner of rental property you need to think about things like the local real estate market as well as property management for your rental units. You also need to be prepared to collect rent and evict bad tenants. The good news is that you’ve come to the perfect place to learn some helpful tips that will make becoming a landlord easier.
Keep reading this article to learn more about owning rental property.
Think About Income Potential of Owning Rental Property
If you’re planning on making a side income from owning rental property or making it your primary source of income then you need to look into the income potential of the real estate you’re looking at purchasing. While real estate is a great way to grow your wealth, you’ll hurt yourself if you invest in properties that don’t bring in any income from tenants.
A good rule of thumb to use is the 1 percent rule. This rule helps you get a good amount of rent from your tenants on a monthly basis. The 1 percent rule says that you should get at least 1 percent of the value of the property from your tenants in rent each month.
The best approach to take is to make sure that your monthly rent incomes cover the mortgage costs of your rental units. This will allow you to use those rental incomes to pay down the mortgage until you’re the sole owner of the unit. Make sure you learn more here.
Think About Location
Location is a huge deal when it comes to owning rental property. If your property is in a location where there isn’t much demand to live in then you’ll struggle to find consistent tenants. This is one of the biggest determining factors when it comes to the success that you could have by investing in real estate with the intent to rent.
One of the big things to look at when it comes to location is the quality of the schools in the area. This will be a great way to attract families that want to move to the area. You should also consider the proximity of places to shop like shopping centers and malls.
There are also the aspects of how aesthetically pleasing the neighborhood is that your rental property is located in and how safe the area is. People will pay more in rent in order to live in a safe neighborhood that looks nice.
With that being said, there are some great opportunities for real estate investments if you have the skills to fix up rundown homes. You can fix those homes up and make them an attractive option for people that want to rent a place in the area but still stay within a budget.
Figure Out Your Ideal Tenant
You should also think about the type of tenant that you’re wanting to attract to your rental property. If your rental property features smaller apartments then you should try to gear your rental property towards students that go to college or university in your area. This is great because they’re only staying there on a temporary basis rather than long-term.
If you’re targeting tenants like families then you’ll want to make sure that you’re investing in a rental property that is more luxurious and nice since odds are that they’ll be there for a longer stay. Families want a home that is of higher quality than what a college student would expect.
This is also important to remember when you’re setting how much you want to charge for rent for renting out units. College students won’t be able to afford to pay as much in rent each month as a family with dual incomes.
Plan for Contingencies
In an ideal world, you’ll never have a shortage of people that want to be tenants at your rental property. If something happens where you’re stuck without tenants at your rental property then you need to be prepared. This is especially true if you investing in real estate is your primary source of income.
If you don’t have tenants then you could get stuck with paying your mortgage bill out of your own pocket each month. This will add up in quick order until you find a new tenant. This is also something to think about with college students that will move back home for the summer at the end of the school year.
You also need to set some money aside for any repairs that your rental units end up needing. This could be a new air conditioning system or it could be replacement appliances for the kitchen. Either way, you need to be prepared for these kinds of contingencies and situations when becoming a landlord.
Figure Out Who Will Handle Property Management
If you’re just getting started with owning rental property then it is a good idea to consider getting property management. This is a great way to learn from a professional if you wish to manage your properties at some point in the future.
It is also a great way to take a big burden off of your shoulders if you’re trying to manage multiple properties across the city or across the country.
Get Started With Owning Rental Property Today
One of the best ways to build a stable and strong source of income is by investing in real estate and owning rental property. It is an effective way of paying down the mortgage while also becoming a landlord. Make sure that you have money set aside for contingencies and follow the rule of 1 percent with your rental property.
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