A great way to generate income on the side is by becoming a landlord. It can be a perfect way to make money passively. However, it can be a lot of hard work getting started with rental properties, especially if you are new to the game. The key is to start small and work your way up from there. Many potential investors get themselves involved in rental properties to help create extra, passive income to fuel their lifestyles.
Traditionally, investors would look for houses on the market which they could easily flip. Flipping houses is a technique where real estate investors would look for homes that are considered “diamonds in the rough” and then remodel them. Once a home was finished being remodeled, it could be sold for a lot of profit in the right market. On the other hand, renting out a property can offer investors a great monthly income and free up cash flow for investing in other properties.
New investors should enter the market cautiously and overestimate the cost of potential repairs when purchasing a home to make into a rental unit. Below are some tips and advice from expert landlords to new rental property investors on how to be successful.
Keep Goals In Mind
Investors who want to become successful should never forget what their ultimate goals are. If an investor is hoping to live off of their rental income, they need to have goals set on getting to that point. Their goals should include how many rental properties it will take to get to that point. Keep in mind that your tax rate will change as your income becomes passive rental income.
Put Financial House In Order
Knowing your expenses and income will put you in a better position to apply for loans. This is important when you are wanting to expand your number of rental properties. When listing your income and expenses, don’t forget things such as maintenance, insurance, taxes, management fees, major repairs and utilities.
Learn Property Ratings And Vacancy Rates In Your Market
To be successful in generating passive income from rental properties, you will need to know the ins and outs of your market. Each real estate market has homes in areas rated A through F. Each rating will typically sell for different market rates. The experts recommend keeping your vacancy rates at five percent or less. This will keep you from having rental properties that go vacant for months on end. You don’t want to end up being a property babysitter.
Keep Options Open
When you are new to investing in rental properties, it is best to keep your options open. Consider looking for potential properties located within the secondary markets. Look at the cost of rent in the area and inspect how well a potential house was built. Most properties that tend to do the best are ones located near popular retail stores, schools, points of interest, malls and local transportation. Once you purchase the home, maintain the outside meticulously until it gets rented.
Screen Tenants
This is a crucial part of being a successful landlord with rental properties. Before you start renting out a property, create an application process. There are many online services that will help you screen possible tenants and check for criminal or civil lawsuits they may have on their records.
