Investing
in real estate right now can be surprisingly profitable, if everything goes
well. Rents are climbing in many areas, and more properties may be coming on
the market. Having plenty of property when the market climbs back up will be a very wise investment if you plan on selling a home during that time. On average, investors used
to set their rents based on 1% of the purchase price of the home, an annual
gross return on 12%. With more people
facing foreclosure due to today’s economy, and becoming renters; investors are
getting on average 2% of the purchase price each month.
Before you start looking for those great
investment deals, keep in mind that owning rental property is time-consuming,
expensive and comes with many daily challenges. However, with time and patience, your investment can really pay off when and if you decide to sell a home in the future.
So you aren’t one of those investors who “lose money”, below is a few
things to keep in mind as you contemplate on becoming a landlord.
1.
In real estate, time is of the essence. You lose money when your property is empty,
whether you are making the repairs for the next tenant or are between tenants.
A lot of first time investors will wait for the more financially secure tenant
to come along and pay “higher rent”. The
perfect tenant may take months to come along, therefore more money lost. You may be better off accepting a lower rent
than waiting for a higher-paying tenant.
2.
As with all homes, you will be making a lot of repairs. It is a
good idea to set aside six months of expenses so that you will have money if a
major repair is needed.
3.
Owning real estate and renting it out is not the same as owning
a home. Many states and communities have
strict and complex laws for landlords, even if you own only one property. Check with your individual state for a copy
of the laws and bi-laws. Protect
yourself and your investment.