Is Rental Property Investment the Best Place to Invest Money?
The stock market can be a very risky investment in times of recession and global financial turmoil. To be on the safe side, many people are opting for real estate investment. Among the many aspects of real estate investment, rental property is among the most popular. Rental property investment is considered a stable and decent investment option of all times.
If you are a first time rental property investor, you need to be very careful and educate yourself in this area of investing. Otherwise, it is easy to fall into financial hitch. You can always start with talking to property owners, investment advisors to find out the pros and cons of rental property investment. You must go through careful thinking, planning, and wise decisions making before you decide that rental properties is the best place for you to invest your money.
There are a few key points to help you understand more about rental property investment:
UnderstandingCash Flow. Cash flow is calculated by subtracting the housing expenses (mortgage payment and property tax) from the money received from the tenants per month. Positive cash flow is when the received money is more than the housing expenses; whereas, when the housing expenses are higher than the received rental income, it is called a negative cash flow.
Knowing theRules and Regulations. There are certain liabilities and responsibilities in real estate investments, which are specified in the country's jurisdiction. To know more about real estate investment tips, property deals, rules and regulations, you can be part of the 'landlord network' in your area. This will alert you to the properties which are on sale, and the ones which are worth buying.
Choosing Rental Property. Making the right choice in choosing your rental property is crucial to your investment success. You can opt for single or multi-family unit or a vacation home. While searching for properties, make sure you consider locations which are in demand, so that you can find tenant easily. Such locations include areas near colleges, universities, corporate offices and good residential sites. Choosing the right rental property can guarantee you tenants and high rental fees collection. A property in a suitable location is also easy to sell, without incurring losses.
Property Buying Tips. When you get a good property deal at a good location, do not forget to evaluate the rental property. You can consult a professional or a real estate agent to calculate the real estate value. It is also a good idea to discuss with the landlords in the area where you plan to purchase a property. To get a better idea about rental property tax, you can seek advice from a tax advisor. Always discuss with a lawyer to avoid any legal issues of rental property investments. While purchasing a rental property, make sure you buy a renter¡¯s insurance too.
Choosing Tenants. After you have purchased a rental property, you can start advertising to find tenants. However, do not make haste, you must choose your tenants carefully. Make sure you analyze the creditability and screen your potential tenants for their background, references, permanent address. You should prepare a contract and discuss the mode of transaction. It is always advisable to collect security money from the tenants to avoid any possible risks.
Selling Rental Property. When you purchase any investment properties, decide how long you want to own them. A long possession will require investment in repairing and maintaining the properties. Both short-term and long-term possessions have their pros and cons. In the case of negative cash flow, you can sell the home or property, instead of incurring loses. With this money, you can take possession of a better property.
Do not worry too much when your properties are not occupied in the first few months of investment. It takes a little time to seek out good tenants. It is commonly observed that most of the rental owners do not calculate the annual returns but make sure that you check the cash flow and keep yourself updated about other property investment options that may provide you higher returns. A major advantage of real estate investment is that it will always continue to boom. With the population increasing day-by-day, obviously people will need homes to stay.