Advantages of Rental Property Investments
Ways to Make Money
Long-Term Income
While most investments mean you’ll get a return in the form of money, stocks and annuities have higher risks associated with them. You could lose your initial investment. With rental properties, you’re getting a steady, long-term income that offsets the expenses and puts money in your pocket without the same risks. Many fixed rate annuities average approximately 3.27 percent on investment. That’s not nearly as much as a rental investment.
Equity Building
When you purchase a rental property, you’re not spending money each month on the mortgage. Your tenant is the one paying the mortgage while leaving you with money in the bank. The principle is also being paid at the same time, so the tenant is essentially paying down your mortgage, which builds up equity in the home without you spending money out of your own pocket.
Appreciation
Like other assets, the value of the property can go up or down depending on the market. Except for the housing crash of 2008, the history of real estate shows a steady climb in value over the last 40 to 50 years. Purchasing a rental property now means that eventually you could sell it for more than the purchase price if you wanted to make money quickly.
Ancillary Income
In many rental properties, there are ways to make income from services provided to the tenant from vending machines in common areas to laundry facilities on the premises. It’ll allow you to collect more money on your investment from a captive audience of customers. Your tenants will often need a place to do their laundry, and if you provide facilities, you’re giving them an amenity while providing yourself with more income.
Dangers and Obstacles
Rental Conditions
There are some obstacles to owning rental properties. You’ll need to make sure the property is always ready for renters. That includes making sure the landscaping is attractive. Cleaning and regular maintenance should be done on the interior and exterior of the property. When a tenant leaves, the units will need to be readied for the next renter.
Tenant Screenings
Finding the right tenants for your property can be incredibly difficult if you don’t know how to screen them properly. You could end up with a tenant that will trash the property, not pay rent or become a nuisance. It’s vital that you do background and reference checks on all potential renters.
Taxes and Accounting
When you have rental property, you’re essentially a business entity with its own tax concerns. You’ll need to make sure you’re getting an accountant who is familiar with rental properties to do your taxes each year. It’s vital to your business that you keep a firm hold of accounting and paperwork too.
Tips for Rentals
Planning for the Future
When you’re thinking about buying rental property, you want to ensure that you have a plan for the future. If you plan on purchasing more than one property, there should be a business plan in place that is a roadmap to your investment future. You will want to save your money, so you can invest in another property, and that takes a clear, actionable plan.
Check on Millennials
You might decide to buy a property with the intention on selling it in the future. To this end, renting to own might be an option. Millennials are spending more in the coming years buying new homes than any other age group. When you can appeal to this age group, you’re more likely to find someone who will want to rent to own your property.
Hire a Rental Management Company
Use a property management company in Donna to perform most of the tasks listed above. Whether you’re a first-time investor or plan on buying more properties in the future, property managers in Donna can screen potential tenants, turn over the units for new renters and keep the property clean and well-maintained.
When you hire a management company, you get a higher quality of tenant for your properties since the management company has the resources and experience to screen your tenants properly. Higher quality tenants will pay on time, rent long-term and cause less issues. When you have good tenants, you’ll make more money with your rental property investment. This will give you the freedom and purchasing power to expand your investments to more properties.