Rental properties can make for a very lucrative investment. However, you do have to know what you are doing if you want to be successful. Although rental properties can bring in very interesting returns, too many people still overlook them.
The first thing is to find something with a good return on investment. Real estate is an illiquid asset that requires you to minimize on your liquid assets. You need to make sure that the rate of return you get is similar to the one you were getting through liquid investments. This means that you should find a true cash flow property, and not a money pit.
Investing in real estate, therefore, shouldn’t be about the appreciation, but rather about the cash flow. Calculating your cash flow means you need to work out how much money from your rental is left after you have paid for all the necessary expenses. The best possible investment allows you to leave your cash flow untouched in a bank account somewhere. Your cash flow will also go up as rent prices go up. This is particularly true if your mortgage payments stay the same. A good cash flow is at least 20% of the money you get in overall. Spend some time using the internet to work out exactly how much your cash flow is.
Generally speaking, it is easier to get started with rental properties if you are younger, particularly if you don’t have a lot of money to put down. This is because banks usually want at least 20% as a down payment before agreeing on a mortgage. This can be a significant amount, particularly if the property needs repairs as well. However, those who are younger can often get better deals on mortgages, as they have longer to pay them back. There are quite a few other things you need to look into. Finding the property is an entire enterprise on its own. However, finding a property also requires a lot of analyzing and research. Plus, you will need to find a representative realtor to help you as well. Their goal is to make sure that you find good properties and make solid investments. Once you have found a property, you will need to go through the process of actually becoming a landlord, which also takes a lot of training and research. Do remember that it is time worth spending.