Deciding to invest in rental properties can be a great idea. However, in order to be successful, you do have to research the opportunity. Too many people don’t look into rental properties, despite the potential for returns.
You can easily compare rental properties to stock markets. This is because most of us understand these and know that we need to spend money to make money. However, there are no guarantees at all that stocks will actually perform well. It is comparable to retirement calculators, who make a guess in terms of when we die. The problem is that if there is a mistake in this estimation and you actually live longer, your final years will be spent in poverty.
Your investment should also be as low risk as possible. Real estate is never risk-free, but some have much higher risks than others. Try not to choose private real estate funds, fixer uppers, real estate development and tenant-in-common options. Indeed, with these options, so much can go wrong that you are likely to never see a return on your investment. Instead, look for good properties and title them to yourself. This does mean that you need to take the time to analyze and research your options and to exert due diligence. Next, you need to find a property that doesn’t require a lot of management or time. Hence, you don’t want to invest in a holiday home, a college home or a property in a bad neighborhood for instance. What you want is a long term rental opportunity with tenants with a good credit profile. This does require a commitment on your side to treat your tenants with the respect they deserve. It is impossible to never have a problem with your property, but so long as you deal with issues quickly, this shouldn’t be anything to really worry about.
If you don’t have a lot of money to put down, you will find that it is easier to invest in rental properties if you are younger. This is because banks usually want at least 20% as a down payment before agreeing on a mortgage. Unfortunately, 20% can be much too high, particularly if the property needs repairs as well. However, when you are younger, banks are generally more lenient and understanding. There are many other things to think about as well. One of the things you will need to work out is which property to invest in at all. Finding a property involves a whole lot of research and analysis as well. You also need to work with a good realtor to represent your needs. Together, you can start looking for properties. Once you have found a property, you will need to go through the process of actually becoming a landlord, which also takes a lot of training and research. However, overall, it is time well spent.