Most people crave passive income. However, it requires an initial investment and nurturing. After the initial hard work, the investment will grow and sustain itself. You will not need any more effort while earning a steady income. Since you will not engage in any active work, you have enough free time to spend on the things that excite you.
Most people dream of such investments. As Drew Doheny Property Management Team says, you can achieve these by owning a rental property. It is essential to note that it doesn’t stop at investing in rental properties. There are some guidelines to obey and risks to avoid if you want a passive income from your rental property.
Below are some steps to follow:
- Choose the appropriate investment strategy that suits you
There are several ways you can invest in rental properties. Choosing your technique is the first step to consider. Your choice of investment strategy should depend on your goals, lifestyle, experiences, and budget. For that reason, it is crucial to study different rental properties before you decide on the best one that suits your needs.
Rental properties can be commercial or residential. Residential properties also have subclasses. These include single-family homes, multi-family homes, condos/coops, getaway homes, luxury homes, and vacation properties. On the other hand, commercial properties have about five subcategories:
- Retails (stores, shopping centers, shops)
- Leisure (hotels, pubs)
- Industrial (warehouses, factories)
- Healthcare (hospitals, medical centers, nursing homes)
Examine the pros and cons of each type of rental before you settle for one.
- Research different locations
Location is one of the most crucial factors that will determine your success or failure in real estate investment. Owning the best rental property in a terrible area will make you lose your investment. Before settling on any location, it is essential to conduct in-depth research.
A good neighborhood is one that can guarantee you many potential tenants that are ready and able to rent the property. The location should have the following features:
- Accessibility to major transit routes
- Proximity to amenities, infrastructure, and community spaces
- Ongoing or future plans for commercial development
- Employment opportunities
- Consider your return on investment
The aim of investing in rental property is to make profits. For that reason, you need to have a clear picture of the profit you should expect every month. It is easy to know your profit if you can estimate the expected rental income and monthly expenses.
Ensure that you consider every expenditure before fixing the rent for the property. Doing so will help you recover your investment and also have some profit every month.
The returns you expect will depend on several things such as purchase price, market value, mortgage interest, etc. Insurance fees, repairs, maintenance, taxes, and unexpected costs are some expenses you should not forget. Every investor wants a property with more rental income but minimal operation cost. You can achieve this if you put in some work.
- Build an effective and reliable team
Managing a rental property requires a multidisciplinary team. You will need different professionals such as an electrician, handyman, real estate agent, tax accountant, attorney, etc. Some landlords shy away from building a team because of the cost implication. However, having a standby team of professionals is an investment that will sustain your passive income. That is because these experts have more proficiency and will offer you professional advice and services.
- Hire the services of a property manager
Managing a rental property requires a lot of work. You will need to market the property, search for tenants, screen renters, maintain the property, perform repairs, handle emergencies, collect rents, evict bad tenants, etc. All these activities can be time-consuming. When you manage the property yourself and generate income, such earning is no longer passive. That is because it will require your active involvement.
However, property managers will assist you in performing these responsibilities. As a result, you can enjoy your income without engaging in any active work. Property managers have the skills and experience necessary to make your rental property yield more revenue. Although their service will cost you some fees, you are sure to generate extra money from your investment.
Why you should invest in rental properties
Investing in rental properties comes with numerous benefits. Some of them include:
Since tenants will be paying rents, the property pays for its mortgages while you enjoy the extra income.
It is easier to acquire more through equity financing after owning your first rental property.
Unlike other passive investments like stocks, you have more direct control over your assets.
Investing in rental property provides leverage if you need a bank loan to finance the purchase. You will not need to provide collateral because the rental property will serve as one.
The bottom line
There is some lucrative passive income you can earn from owning a rental property. These come in the form of rents, tax write-offs, and cash from tenant-friendly amenities. Amenities that can generate extra passive income include parking spaces, laundry services, and high-speed Internet. Your property manager will make more recommendations depending on the location and property type.
Where Can You Get Some Assistance?
Is building passive income with rental properties right for you? To learn more or get some valuable assistance from a knowledgeable Atlanta agent be sure to contact us today at 770-280-4560.