There are many ways in which a person can make a living when it comes to real estate investing some of them carry more risks than others. It goes without saying that those that carry the greatest risks are often the very real estate investment methods with the highest potential profit but slow and steady, in many cases, wins the race. Flipping houses is in the news a lot because so many fortunes have been made doing this-more than a few have been lost in this venture as well but those don't make the news nearly as often.
Working with rental properties isn't nearly as glamorous and doesn't
provide the almost instant profits that flipping houses might but it is
also a great and very valid method of real estate investing that will
build a steady profit over time if you plan properly. Rental properties
are in demand now more than ever with so many people going into
foreclosure and losing the homes they've worked hard to build for their
families. For this reason rental properties are a good thing to own at
the moment, especially those that are family homes.
There are many reasons that people rent and while there are some
risks involved when renting properties, the risks are much lower than
the risks involved in flipping or pre-construction investment endeavors.
There are a few things you should consider when purchasing a property
for the sake of renting however in order to make a wise and long lasting
decision for your real estate investment.
First, only invest in rental properties in areas that people want to
live in. It may be true that you can buy property cheap in a few very
run down sections of town but it is doubtful that you will turn those
properties into profitable rental units. It is best to pay a little more
for a more attractive address for renters. You will find that your
properties are inhabited more often, which will make you more money in
the long run.
Second, pay attention to the types of people in the area and buy
rentals accordingly. It is quite possible to turn large homes into
multiple smaller apartment units (according to local zoning laws) that
are ideal for college students. You do not want to do this however in an
area that is geared towards family homes and won't be friendly or
tolerant of college students. Design the rentals according to the market
you are attempting to attract.
Third, don't be greedy. The goal of owning rental properties is of
course, to make money. At the same time if your price your properties
too high you will find that they sit empty more often than not. Every
month that your property is empty is a month that you aren't making
money on that property at best and a month that you are losing money at
Fourth, know the market. Study the local market for buying real
estate and renting real estate. This will help with many things, not the
least of which is determining whether or not any given property will
make an attractive rental unit. Another thing it will help you determine
is how much rent the units you are considering can bring in month after
Finally, when renting properties you need to keep your eye on the
long-term goals rather than shortsighted goals. Property rental is a
marathon rather than a sprint with the greatest profits coming at the
end. You will want to pay as little interest on the property as possible
and pay the property off as quickly as possible in order to realize the
maximum profit potential and acquire new properties. The real money
when renting properties as a real estate investment isn't in renting out
one or two units but twenty or thirty. The more rental properties you
own the more money you stand to make from owning them.