6 Tips On Renting Out Property
By Kurt Real Estate Nov 23, 2019
Many seek to get into the rental market to create a passive form of income for themselves. As you’ll well know by reading Why You Should Invest in Real Estate, such investments are worthwhile and can be very profitable. Whether you’re thinking about renting out property you currently own or are considering buying property to rent, here are a few tips on creating income from your rental investment.
1. Identify your goals. What is it that you seek to achieve through this investment? Are you looking to live off of this passive income or are you looking for something to foot the bill for that new car? Maybe you’re going to be putting a kid through college and need the extra cash. Tax rates change when the income becomes passive; you can deduct depreciation from your taxable income.
2. Know your income and expenses. Getting your financial ducks in a row will help you when applying for a loan(if purchasing property to rent). Keep in mind that buying a new property includes taxes, insurance, maintenance, and management. When it comes to maintenance and management, you’ll likely want to hire a property manager. They will handle all rent collections, maintenance needs, and any other management related items so you don’t have to. It’s well worth the nominal fee.
3. Educate yourself on the area – vacancy rates and property ratings. If you already own in a rental community or complex, is there a lot of turn over or vacancies? This should be something you pay very close attention to if you’re looking to purchase a property to rent. What is the area like? Try to stay in areas that have A ratings. Properties in good school districts are more desirable and will rent for a higher price.
4. Explore your options. It may be worth your while to buy something in a good neighborhood that may need a little fixing up. If you can determine that a few improvements will significantly increase the rent, the investment could pay off. Upgrading kitchens and bathrooms with granite counters, for example, can notably change the appeal of a place and in turn increase the rent you can charge due to higher demand.
5. Don’t let low interest rates fool you. If a property would cost the same to build it as it would to buy it, do not buy it. It should have enough value to get the returns you want.
6. Screen the tenants. Two types of tenants exist: Type A and Type B. Type A tenants are those that tend to be long-term tenants. They pay on time and they keep the property in great shape. Type B tenants may have some delinquent payments, may sublet without permission, and often they do not maintain the property. Be sure to take all necessary screening measures to guarantee you are renting to a Type A tenant.
Investing in real estate can be very lucrative. Renting property creates residual income that can help you with life’s expenses or can be your retirement plan. Whatever your purpose, if you’re looking to make an investment, check out our 7 Tips to Making the Right Real Estate Investment.
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