This blog provides you with tips and tricks on how to make money with rental property.
How to Make Money with Rental Property: Positive Cash Flow
Generating positive cash flow is the ultimate goal of real estate investors who invest in rental properties and it’s the ultimate answer to how to make money with rental property. In order to have a real estate investment that generates positive cash flow, the rental income or investment income should exceed the expenses or costs you pay for the property.
For example, if you rent a property for $1000 a month and the expenses amount to $650, you generate a profit that is worth $350 a month and that is what is known as positive cash flow. On the contrary, if you rent a property with $1000 a month and you spend $1100 on it, you do not generate any revenue since your expenses exceed your revenue and that is what is known as negative cash flow- something every real estate investor tries to avoid.
There are many tips you need to follow in order to get positive cash flow and know how to make money with rental property. You should make sure that you price the rent of your property in a way that exceeds its costs and try to decrease the costs as much as you can. This can be done by managing the property yourself instead of paying money for professional property management.
Related: How to Turn a Negative Cash Flow Rental Property into a Positive Cash Flow Rental Property
How to Make Money with Rental Property: Tax Benefits
Tax obligation is a thing that no one can run away from. However, there are a bunch of tax benefits that real estate investors can benefit from and even turn into one of the answers to how to make money with rental property.
Learn: How the 2018 Tax Reform Affects Real Estate Investors
You as an owner of rental properties are qualified for a number of tax write-offs that can help in reducing your taxable income and make you some cash in the process. Some of the tax write-offs you qualify for include repairs on your property, insurance premiums, property utilities, property management fees, operating expenses, marketing and advertising costs and many other tax write-offs. This actually means that there are plenty of opportunities that you can take advantage of and the more advantage you take of them, the less income you will pay taxes on. In all cases, it is advisable to hire a tax professional as they know the ins and outs of tax law and can help you make the most out of it which will eventually put some money back into your pocket.
Are you curious to know more about the tax benefits of real estate investments? Make sure to check out The Tax Benefits of Real Estate Investments.
How to Make Money with Rental Property: Property Appreciation
Another answer to how to make money with rental property is appreciation. Appreciation is explained in a nutshell as follows: When you as a real estate investor buy a property, you either pay in cash or get a mortgage at the current asking price. With the passing of time and the changes in the real estate market, the hope is that the value of your property will increase and if not, you may think of adding some amenities or improvements to increase the value of your property. And when you put your property on sale, the more your property appreciates, the more money you will get right back into your pocket.
However, you have to keep in mind that if you want to solely focus on appreciation as a way to get money out of rental properties, then you need to know that getting money from appreciation happens over a relatively long period of time. If you are planning to buy a rental property for appreciation purposes, make sure to look for locations with a potential of development in the future in order to get a higher value for your property.
Are you torn apart between investing in real estate for cash flow vs. appreciation? Then you need to check out Real Estate Investing for Positive Cash Flow vs. Appreciation.
How to Make Money with Rental Property: Property-Related Services
As a real estate investor, you know that tenants should pay for any property-related services such as laundry, cleaning services and so on. You can add these services or suggest them to the tenants which can earn you extra money out of your rental property. This, however, does not indicate that you have to get down on your knees and start scrubbing toilets and bathtubs. You can partner with a local service or operator and offer their services to your tenants and you can make some money out of it. There are plenty of other property-related services that you can think of depending on the type of tenants you are dealing with (families, students, travelers) and also the type of rental property you have and its location.
Related: The Beginner’s Guide to Rental Property Analysis
Bottom Line
The answer to how to make money with rental property comes in different shapes and forms. You just need to be smart about it by knowing the ins and outs of the US housing market. You should also know how to market your property and get good tenants who do not bring you a headache. In a nutshell, you can easily be a real estate investor through being a landlord and being educated in regard to real estate investment and continuously follow up with the real estate market and its changes. Mashvisor has it ALL for you whether you are a beginner investor or a seasoned one, so do not forget to check it out.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.