Real estate is an exciting and profitable financial investment. There are many options available for those wanting to add real estate to their portfolio. One of those is investing in rental properties.
Rental properties are popular and profitable. Over 10 million Americans report earning money from rental properties every year. Among those 10 million people, the average yearly income is currently about $73,659 a year.
With numbers like that, it’s not shocking that you’ve decided to get involved with the world of rental property investments. If you’re ready to succeed in that world, here are five tips that can help you.
1. Research Before You Buy
Before you buy a rental property, you need to do some research. It’s important to really understand the area the rental is in. You need to know what would work in your favor and what could scare potential tenants away.
In general, you want a property with access to good schools, in an area with a low crime rate, that isn’t too secluded or surrounded by vacant houses. You also want to find out what the average rent is in the area. You need to know you’ll make enough from the property to justify the buy.
2. Make A Tax Plan
Rental income is taxed as ordinary income. So when tax time comes, the IRS is going to want a percentage of the money you made. How much you owe will be based on how much you made, just like with ordinary income.
Meet with a tax expert to decide how much money you need to be setting aside to cover taxes on your income, as well as property taxes. This is also applicable with timeshare rentals, most of the owners opt to get out of a timeshare because they can no longer afford the taxes and maintenance fees every year and the best way to cancel a timeshare is to ask for help from the expert timeshare cancellation company. Once you know roughly how much you’ll need, break that down into what you need to save per rent payment.
When you make your tax plan in advance, you save yourself from very costly surprises.
3. Plan Your Upgrades
Regardless of where the property you end up purchasing is, there are some upgrades you can make that will add value. Eco-friendly and energy-efficient features are growing in popularity everywhere. Over half of the population says they’d like to live in a home that’s better for the environment.
You can take advantage of that trend to help the Earth and yourself. Adding energy-star-rated appliances, a tankless water heater, a living roof, smart plugs, or even a ceiling fan are all ways you can make your property more eco-friendly. These options all lower the carbon footprint and electric bill of a home, which is a great pitch point for potential tenants.
Some green upgrades cost next to nothing and can really boost interest in your property, so commit to making a few green improvements when you purchase your rental property.
4. Understand Your Obligations
In general, you’re responsible for maintaining proper insurance, ensuring safe living conditions, paying property taxes, handling repairs, and responding to complaints and concerns.
Those responsibilities don’t have business hours. There has to be someone a tenant can call in the middle of the night if there’s an emergency. Unless you hire a property manager, that person is you.
If you can’t handle that, you can hire a property manager to be the go-between for you and your tenants. That means they’ll get the midnight calls and be responsible for emergency decisions.
While that removes some stress for you, it does take away from your rental profits. A property manager makes about $50,000 a year on average, so you have to do the math to decide if you can afford one.
You should also be aware that having a property manager doesn’t excuse you from legal responsibility for the condition of your property. If something is wrong and they don’t tell you, you’ll still end up being the one paying fines and fees.
Consider the choices carefully before you decide if being a landlord is right for you.
5. Be A Good Landlord
If you want to become the best landlord, you need to keep your tenants in mind. Don’t complain about making repairs, handle issues quickly, and make it clear that you care. Keep the rent hikes reasonable, and to a minimum.
Too many landlords see renters as dollar signs, so if you want to be a good landlord see them as people instead.
So What Now?
Now that you’ve made your plans and learned more about the process, you’re ready to join the world of rental property investments. You can look into rental loan options right now to get started. The dramatically simplified process makes it quick and easy to get your loan and buy your first property.
When your first property is paid off, you can decide if you want to repeat the process.
Following these five tips will help you succeed in the world of rental property investments. Before you know it, you could have your own real estate empire. Follow Homeinside for more updates.