subject: Would You Choose Rental Properties For A Steady Profit? [print this page] Would You Choose Rental Properties For A Steady Profit?
When choosing how to make a living from real estate investing, some options carry more risk than others. Some real estate investing strategies can be risky but these risks are manageable.
However slow and steady wins the race in many cases. Flipping houses has been in the news a lot lately as so many fortunes have been made investing like this. More than a few fortunes have been lost as well but these stories don't make the news so much.
Working with rental properties is nowhere near as glamorous and does not provide the instant profits that house flipping does, but it is a valid way of investing in real estate that produces a steady profit.
With so many properties currently going into foreclosure, rental properties are now more in demand than ever. This makes any rental property a great investment, even if you own a single family home.
There are some risks involved in renting out properties but these are lower than those involved in flipping houses or purchasing pre-construction properties.
Those who wish to make a wise decision when investing in rental properties need to consider a few things.
First, and it seems silly but it must be said, only invest in properties where people want to live. While you can buy cheap property in run down areas of the town, it is doubtful that you will turn these into profitable rental machines. It is better to seek out attractive areas of the town, even if you have to pay more for them. They will be rented out more often and more easily, increasing your return on investment.
Secondly, pay attention to the type of people that live in the area. While it is possible to turn multiple small units into college units, you don't want to do this in a family area that will not be tolerant to the noise and upheaval that students bring. Nor will the students want to travel far from college. You should design your rentals according to the market that lives there.
Thirdly, don't be greedy even though your goal is to make money, if you price your rents too high, they will sit empty for long periods. When your property is empty you are losing money.
Fourth, study your local market. Understand what sells and what rents as well as the local rates. This will help you decide as whether a unit will make an attractive rental property and if you are paying the right price for it. It also helps you set the maximum available rental and set your budgets.
Fifthly, you need to understand what risks are involved in buying rental properties, you need to become knowledgeable and experienced in managing these risks in order to maximize your returns.
Finally you need to keep your eye on the long term goals rather than short sighted goals. Rentals are a marathon rather than a sprint and your profits are long term. Pay as little loan interest as possible and pay the loans off as quickly as you can. Build your portfolio up as the real profits come from renting twenty or thirty units.
