Rental Real Estate Investment Tips

Renting out Properties = $$$

Jumping into the real estate investment game of renting out properties looks like a dream come true. You just buy a house that people would want to rent, find people to rent, and make cash while you sleep. In reality, there are matters that many first-time rental investors do not consider. Below, Shearer Realty will discuss the pros and cons of owning rental properties and give you a couple of tips from the experts.

Pros of Rental Properties

Believe it or not, there are advantages to owning rental real estate investments. If done right, you can make a lot of money investing in real estate.

1. Increased Assets

   One of the biggest advantages is owning rental real estate means you own tangible assets. These are physical assets such as land, houses, buildings, and more.

2. Property Value Growth = Income Growth

   If the demand of real estate market increases, so to does your income. Since you own the property, you can gain an increase in property value and adjust the rent of the property depending on your area and demand. Appreciation of a property is not guaranteed, however, if you invest in stable properties, such as those found in or near cities, there is always a higher chance of increased property value due to inflation.

3. Your Property Never Stops Evolving

   Using your some of your profit as “sweat equity” is wise to do when you’re a property owner. Many people believe that to be a property owner, you buy and rent a house out, the end. Wrong. People, styles, and “what’s in” are always changing. It is important to invest in upgrading and sprucing up your rental property. Whether it is painting the house, landscaping the yard, or upgrading the appliances, maintaining these simple things will make your rental property more desirable, meaning you’ll get people who want to pay you more.

Cons of Rental Properties

To every upside, there is a downside and if you do not manage your property correctly, the downside could come your way. So let’s learn the con’s and how to avoid them.

1. Upkeep and Repair Costs

   Owning a rental property turns you into a residential hospitality provider. If the plumbing clogs, heater blows cold, even the tangible items, such as a refrigerator goes out, it is your job as a property owner to get these things fixed and working for your tenants. It’s near impossible to prepare for the unplanned expenses of owning a rental property. The best thing you can do is have a healthy repair fund for those unexpected moments.

2. Liability Lawsuits

   Emotional distress can be filed as a liability lawsuit if a tenant is paying for a property that they were injured from due to lack of repair. For example, if a stair-step falls through while a tenant was walking on it. It is important to get your property inspected and ensure the property you invested in is still in tip-top shape and passes all government codes.

3. No Income Months

   It is something we hope never happens to us, but it does. There are people considered “bad tenants” that will not pay their rent, leaving you with their financial burden. The only way you can get them to pay what is owed is to collaborate with a collection agency.

   There are also vacancy months that many rental property owners do not plan for. If for some reason, you property will not get a nibble from the tenant pond, you still have to pay for it. Another reason it is always good to have a safety net of cash set up for your investments.

Minimize Real Estate Investment Risk

Minimizing the disadvantages in real estate can be quite simple. By following these tips you can reduce risk and become a real estate investment master.

1. Reasonable Goals

   It is every investor’s goal to a point where the rental property makes the money and the investor lives life. But it is important to remember that getting there will take time. If you’re getting into renting properties out, don’t plan on buying a mansion and yacht with your profits. Build up your net worth, rental properties, and value.

2. Keep your Property Legal

   Federal and state laws are changing every year. It is important for you to be a good study and know the rules. It is better to spend 50 hours reading and learning the laws, than spending 50 hours in a courtroom fighting for your money over something as simple as your lease wasn’t written correctly.

3. Consider Management Services

   If you’re someone who isn’t interested in studying property laws, making sure tenants pay on time, and dealing with property repairs, you should consider hiring a property management company. Property managers specialize in making sure your property makes money and stays rented.