5 Tips on Making Money With Real Estate Rentals
With interest rates and home prices at historic lows now is one of the best times to invest in rental properties. In addition in many cities World Wide rents are starting to rise. According to Reis, a real estate data firm, rents rose 3.7% in 2012. This is great news for real estate investors who benefit both from the increased rental returns and the rise in house prices that typically follows.
To help you take advantage of the current real estate market we have put together these top tips for making a lot of money with real estate rentals.
#1 Location is Key
As the old saying goes successful real estate buying is all about “location, location, location”. When choosing where to buy you should look for areas with a large pool of potential renters. A large supply of renters means that your property will be vacant for a shorter periods of time, you will be able to more selective in your tenant choice and you can command higher prices for your rental properties. This is why rural areas typically make for poor real estate rentals. Before purchasing a rental property also be sure to check out the neighborhood. If there are a lot of vacant properties or houses to rent then this can depress the rent you will receive for your property. Also choose low crime neighborhoods with facilities that working families demand such as schools, parks and shopping.
#2 Use Professional Management
One of the most common complaints about becoming a landlord is that people do not want have to spend their weekends fixing toilets. However if you use a professional management service then you never will have to either. As a property investor you make your money by selecting high quality properties. Before you buy your rental property you should have allowed for any management fees. Professional management means that you can concentrate on the business of building your home purchase portfolio.
#3 Make Your Money When You Buy
The time to make money on your home rentals is when you buy not when you sell. This means being selective about which properties that you purchase and ensuring that you are buying them for a reasonable price. In the recent real estate crash many investors where burnt because they were buying houses on the assumption that it always goes up so it didn’t matter what price they paid. When purchasing a real estate rental the rent you receive should cover all of the outgoing costs so that you can hold the property for as long as needed. If you do this you will not need to concern yourself with temporary fluctuations in the Home Buyers market.
#4 Have Access To Capital
It is important that you are able to meet your mortgage payments on the rental property even if it is vacant for an extended period of time. You should also be able to afford to make repairs to the property as needed. Having a revolving credit loan or up to six months savings are two good ways to achieve this.
#5 Form A Strategy
One of the biggest differences between highly successful home buyer investors and those who only achieve mediocre returns is having a strategy. Before you begin decide how you want to make money with real estate investing and what type of properties you are going to invest in. For example will you focus on purchasing low cost homes and renovating them? Or will you invest only in new apartments which need little maintenance? Also understand what your exit strategy is for your real estate investments. Will you hold them indefinitely or do you have a time frame for selling out of your real estate investment. Knowing where you are going will make it much easier to choose the right real estate properties to purchase.
With some of the lowest interest rates in recorded history and rental returns increasing in many major cities we are now experiencing a perfect environment for entering the real estate market. However this opportunity will not last for ever so it is important to capitalize on it while it still exists.