Are Rental Properties Really a Good Investment?

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Although having a 9-5 job is the traditional way to make a living, there are actually lots of other ways to earn money. If you are interested in making a little bit extra, many Americans earn a second income  by having rental property. Here’s a list and explanation of whether or not rental properties are worth their work and if they can be a good investment. Remember, though, these are just general tips and suggestions. Something on this list may or may not work for you depending on your location, budget, and other circumstances.

  1. Location is key, and should be the first thing considered. A really nice home or apartment in a greatly located area, with a close proximity to necessary amenities (schools, gas station, grocery stores). For most people, location is areal concerns when buying into the rental business; they can make or break your investment or drive you absolutely crazy! The safest bet is to get an affordable property in a nice (but not too fancy) part of town that you’re okay with visiting when need be. Anything else and you might find yourself losing money or dreading dealing with it.
  2. Once you have a location picked out that you think is profitable and tolerable, it’s time to secure the tenants. Now, in reality, this can go one of two ways, and you don’t have a whole lot of say in it. There are some steps you can take to make sure you get good tenants, but you’ll need to put in a little bit of extra legwork. If you have bad tenants, then you’re going to find yourself more frustrated than not and having to fix a lot of broken and run down things. All the extra stress of doing repairs, figuring out late rent, dealing with complaints, etc. may not be worth the money you’re getting out of the property. Having credit checks, and an interview process can help to ensure both the tenant and landlord have a nice experience.
  3. One of the perks of having rental property is the return on investments. It is virtually impossible to make the amount of money in any other industry, can you make as much money so quickly as you can with rental properties. Every month, you’ll be getting hundreds, if not thousands, of dollars from your tenants, depending on the size and number of your rental properties. Those payments largely go into your pocket, although some comes out for insurance, repairs, etc. One great option for renting is if you bought a house and there is a basement apartment. The money you make from rent each month should pay off your monthly mortgage, leaving you with zero debts to pay back. This is especially great if you live in a college town where students are always looking for housing. It may be a hassle at times, but if you’re willing to work through it, then it’s a good system.
  4. Unlike a car or a piece of technology, real estate actually goes up in value over time. Many people get into the rental business purely because of the appreciation. You can buy a house for one price and then, if you decide to sell it later, you’re probably going to make money off it just because time has passed. However, this isn’t as easy as writing a check or depositing one. Buying, renting, and selling property can be a very laborious and stressful journey. You also need to make sure to take good care of the property. If you buy a nice place but let it fall apart, then you’re going to lose drastic amounts of money if you try to sell it as is. The appreciation on rental property can be great (especially if you made lots of money while renting it, too), but it isn’t something you just buy and completely forget about.
  5. While this might be a more technical aspect of owning rental property, one of the benefits is the tax shelter it offers. You can often write large expenses off if they’re related to owning and maintaining the property. Rental properties (like all real estate) also build equity while you own them, and you don’t have to pay taxes on that equity! Also, because it’s a tangible investment, the interest rate on loans taken out to pay for real estate are often quite low. That means you’ll be getting the same amount of money but not having to pay as much back on it compared to a student loan or something similar. When it comes to taxes and interest, a rental property is a good way to go.
  6. If you want to get into the rental game, then you need to be (or become) patient.When you get into renting, you have to put a lot of money into the property at first and, only farther down the road, will you really see the benefits. When you first start, you may not be making much money at all, what with the mortgage, repairs, contracting, and advertising you have to do. However, after ten years or so, the property will be completely paid off and you’ll have a big fat check coming your way every month that can really bulk up your budget. In fact, this is a great way for most retirees to make some extra money to travel!

Not everyone is going to want to dedicate as much time as energy into rental property as is needed to keep it profitable. However, if you are someone with drive, ambition, and a willingness to do hard work, then it’s very possible that rental properties could be a great investment for you. Before you jump into the market, do some research and make sure it’s a good time to buy and it’s something you really want to get involved in!

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