When becoming a real estate investor, you need to decide what kind of investment properties you want to add to your portfolio. When it comes to rental properties, for instance, there are two types of strategies you can adopt. The first one is investing in short term rentals, also known as Airbnb rentals. The second one regards financing traditional rental properties.
In order to be making money in real estate, the real estate investor should be careful when purchasing rental properties. Being a landlord of short term rentals is quite different from being a landlord of long term rentals. That is why the real estate investor needs to know the specific approach that applies to the chosen rental strategy. If you are interested in making money in real estate from traditional rentals, this is the place for you! We will reveal all the information you need to know in order to be a successful real estate investor of traditional rental properties.
#1 Creating a Budget Scheme When Buying Rental Properties
The most successful real estate investors will tell you that budgeting is an important step when buying an investment property, and they are right. In order to be successfully investing in rental properties, you need to carefully review your potential financial assets as well as estimate the probable costs. When investing in traditional rentals, you can easily estimate the potential rental income you will be getting. This is due to the fact that traditional rental properties are associated with a relatively steady rental income, unlike Airbnb rentals.
Besides considering the potential rental income, you also need to keep in mind the estimated rental expenses. For rental expenses, you can compute the monthly mortgage rates and taxes. Additionally, rental expenses might be repairing and maintenance costs associated with your rental properties.
After you have created a budget plan and have decided how much money you can spend on buying an investment property, it is time to discuss how to actually find the best traditional rentals.
#2 Finding the Best Traditional Rental Properties
Finding the best rental properties to start making money in real estate is not a simple task. Becoming a landlord requires a lot of effort, hard work, and patience. The same is especially true when looking for the perfect investment property. Long term rental properties, unlike short term rentals, are occupied for longer periods of time. This means that the landlord has to present an investment property which would be attractive as a long term accommodation. As the future tenants will supposedly live in the investment property for years, it is important to offer a desirable rental in the market. Here are a couple of important steps to complete before you buy a rental property. Curious how to find traditional rental properties? Make sure to read “Traditional Rentals: Finding Income Properties Using a Heatmap.”
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Real Estate Market Analysis
Conducting real estate market analysis can be a great help when becoming a real estate investor. This is simply because such an analysis provides you with insightful information about the market. For instance, you can grasp what is the supply and demand relationship. You can learn if there is an interest in long term rentals or Airbnb rentals in the market. All of this information is extremely valuable when buying an investment property. This is due to the fact that the success of becoming a landlord starts with choosing the best location for your rental properties. Interested to learn more about real estate market analysis? Make sure to read “Real Estate Market Analysis in 6 Simple Steps.”
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Investment Property Analysis
Investment property analysis is another important type of research that real estate investors conduct before they buy a rental property. This type of analysis can help you in finding rental properties which generate positive cash flow and avoid the negative cash flow ones. Investment property analysis reveals more information about the rental properties themselves and their potential performance in the market. This is done through analyzing different real estate metrics, some of which are: return on investment, cap rate, cash on cash return, etc. When becoming a landlord, it is extremely important to take such metrics into consideration. However, it is imaginable that computing the return on investment for various investment properties manually is a hard task that hides its risks. There is a tool which can help you out. This is the rental property calculator.
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Mashvisor’s Rental Property Calculator
Mashvisor’s rental property calculator can be the greatest helper when you wish to buy a rental property. The tool can quickly compute all the real estate metrics you need, such as return on investment, for instance. In addition, it reveals the optimal rental strategy for the property of choice. Choosing the optimal rental strategy for your investments is one of the first steps to being a landlord. By knowing the optimal rental strategy, you can make sure that investing in long term rentals will actually generate positive cash flow rather than negative cash flow.
#3 Deciding on How Much to Charge for Rent
When becoming a real estate investor and operating rental properties, it is crucial to properly establish the rent you will charge your tenants. This can be easily done with the help of real estate market analysis. Besides all the information such an analysis reveals about the market, it can also indicate the market value of your property. This is extremely useful as the rent is typically between 0.8% and 1.1% of that value.
However, in order to generate a positive cash flow, a property should generate more income than its associated costs. If you want to avoid negative cash flow properties, consider the potential costs in the latter computation. Interested to learn how much rent to charge? Make sure to read “Question of the Day: How Much Rent Should I Charge?”
#4 Properly Maintaining Your Rental Properties
If you want to be a successful landlord, you should take care of your rental properties. A good landlord will repair a problem as soon as it occurs. This way you will minimize the costs as you will stop the development of the issue. Additionally, by maintaining the house little by little, you will avoid spending huge amounts of money simultaneously. Moreover, be sure to be present for your tenants. Make sure you establish an efficient way of communicating with them so both parties feel comfortable with the arrangement.
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