With the global economy in somewhat of a slump, people are searching for more ways to earn an income. One of the best places to turn in times like these is the real estate market. Many people all around the world are making a significant amount of money by becoming landlords and investing in rental properties.
It is important before you get started to make sure that investing in rental properties is the right move for you to make. The first step is to evaluate the costs and the financial benefits to this type of investing.
When you are searching for a rental property, you need to determine how much rent you will be able to charge for each property that you consider. You need to make sure that the money that you make from monthly rental payments is enough to pay for the mortgage, maintenance and other costs that may arise. It is a good idea to get the rental agents on your investment team to estimate the worth of each potential rental property. Most agents should be willing to offer such appraisals free without any obligation to them marketing your property.
Once you know what the property is worth and how much you will be able to make through rental payments each month, you will be able to compare income to costs. Make sure that your rental agreement states that it is the responsibility to pay all of the utility bills. This important step can save you lots of trouble and frustration in the future.
Finally, one of the most important steps to becoming a successful rental property owner is insurance. No matter how well you screen prospective tenants, you need proper insurance. If a tenant should ever leave without paying their rent or cause some type of damage to the property, having insurance makes sure that you do not take the downfall.
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Hi Sean,
There’s a lot to consider when investing in rental properties. I think it’s an absolute necessity to ensure the rent covers your mortgage payments and the costs of maintaining the property, etc. For me though, ensuring that you have insurance in case of emergency is also a big concern.
I have heard horror stories of nightmare tenants so I’d really want to be prepared. Not to mention the odd natural disaster. There’s just so much to prepare for.
Finding rent that covers the mortage? Thats a tricky one…I havent been able to find one yet but I am sure they are out there
Hi Sean,
Investing in rental properties is one of the most common methods of wealth creation, but one must be aware that it does take considerable time. It is important to consider the amount of capital gain likely in the area as this is where most wealth is created.
Every year when we do our tax return (and it is nearly time for our visit to the accountant again) we are always asked whether we have rental properties…and we hang our heads and say….”No, not yet!”.
One of the main reasons we would look at a rental property short term is for potential the negative gearing bonus on our tax return…of course long term it is the appreciation in value of the property – even though a positive geared property would also be a bonus!
I must say though… I had never considered insurance as part of the expenditure considerations
I have been thinking a couple of times about investing in rental property, but haven’t found the right rental property to buy so far.
Up to now it always looked like I need to have the full amount upfront to make any income from a rental property, as the rent would not cover a full mortgage let alone any insurance or rental agents cost. So I am still looking for the right place
Sean,
I don’t know if this is something I would want to do as a strategy myself, but I have a lot of friends who do, and do it well.
Yes, you do hear the odd horror story, but insurance and other risk management strategies put into place should alleviate this problem somewhat.
Being informed and educated is the key, so thank you for that great rental advice Sean.
Cath
I remember years ago reading Zero to 130 Properties in 3 Years (think that was the title) and thinking how good is it to have rentals that end up funding each other and nothing coming out of my pocket.
There was a whole formula and methodology, of course, but it is something I one day hope to start. Hey, have to do something with the money I will eventually make on IM! LOL
I think the book has been updated and is still available.