From “Flip or Flop” to “Million Dollar Listing,” there’s no escaping the glut of real estate TV shows where investors try to make a quick buck on the property market. Unfortunately, there’s much more to rental property investing than what you see on the small screen. Here are eight things you need to know before investing in rentals.
1. Ensure an Investment Is Right for You
So you’ve found the perfect rental, but something doesn’t feel right. That’s because a good investment is as much of an emotional commitment as a financial one, and sometimes that ‘dream home’ might not be suitable.
It all depends on your objectives and the amount of time you want to dedicate to your investment. If purchasing a cheap property, renovating it, and quickly putting it back on the market doesn’t faze you, you might find a fix-and-flip investment a great way to earn an extra living. If not, there are plenty of other rental investments available to you.
2. Do Your Research to Find the Right Location
Location is perhaps the most important factor for real estate investing. Find a property in a hot market, and you could generate enormous sums of money in a few short years or even months. Conversely, find a property in a cold market, and you could lose money on your investment.
Researching the perfect location can take time, but you’ll thank yourself for the effort when you land the ultimate rental. Check whether a market is ‘hot’ or ‘cold,’ study an area’s demographics, and evaluate neighborhood amenities. Whatever property interests you, make sure you visit its location several times before making any investment.
3. Partner With a Great Lender to Finance Your Investment
You’ll likely need capital to fund your investment. That’s where a great lender comes in. Of course, you’ll want to choose one that offers competitive interest rates and provides fast access to finance.
Lendmarq enables wealth creation for investors, helping you realize your real estate investment goals. You can find bridge, fix-and-flip, ground-up construction, and long-term rental loans with industry-leading rates and fully transparent pricing. Learn more.
4. Consider the Unexpected
The economy can tumble, buyers’ markets can suddenly favor sellers, and neighborhoods can turn from ‘hot’ to ‘cold’ overnight. That’s why you should always consider the unexpected in real estate investing. Remember, every investment comes with an element of risk.
The best investors set aside funds for unforeseen emergencies. Those funds can help pay for maintenance and upkeep costs or cover a sudden interest rate increase.
5. Choose Between Short-Term and Long-Term Rentals
Short-term and long-term rentals both have pros and cons. Short-term leases generally have greater income potential and allow you to quickly raise rent to meet market demands. Long-term leases, on the other hand, provide consistent income, and you won’t have to find new tenants as often.
6. Consider Rental Laws
Different states and even cities have unique rental regulations to know. (New York City has rent control laws, for example, but Texas doesn’t.) Check the rules in your area to avoid penalties for breaking the law.
7. List Your Rental
Once you’ve found your property (and maybe renovated it), it’s time to list it! Determine rent based on your home’s market value and neighborhood, and create a listing that showcases what makes your property great. Don’t forget to include photos, videos, floorplans of your rental, and neighborhood information. You can work with a property manager during this part of the investment process.
8. Reap the Profits!
Once tenants move into your new property, you can sit back and generate rental income. You might be happy maintaining this investment for a while, or you can expand your portfolio with another property.
Follow these eight tips before you invest in a rental property. By researching neighborhoods, partnering with a great lender, and setting aside money for emergencies, you can reduce risk and make shrewder investment choices.
Contact Lendmarq now to learn more about real estate finance.