A Beginner’s Guide to Investing in Rental Properties

A Beginner's Guide to Investing in Rental Properties

The world of investing can be challenging to break into. With all the legal jargon and differing opinions, no wonder so many shy away from it. To help take away some of the fear of taking that first giant leap, here is your beginner’s guide to investing in rental properties.

Know What Type of Rental To Invest In

There are two types of rental properties you can invest in: residential and commercial. Residential real estate is what comes to mind for most people when they think of rentals– a home for someone to live in. Commercial properties will house a business of some kind, say a restaurant or an office. Either of these can be short-term, long-term, or turnkey.

Short-term rentals are properties only meant to get leased out for a few weeks or months at a time, like vacation houses. Long-term rentals are properties intended to get rented for a year or longer, like a single-family unit. Turnkey rentals are much like long-term rentals, except everything to generate income is already in place, such as the renter, property manager, amenities, and so on.

What To Look For in a Rental Property

Only when you’ve decided whether you want to invest in commercial or residential real estate can you determine what to look for in a rental property. Although, as a general rule, the most important aspect is location, but what you’re looking for exactly will vary. For example, if you’re looking to rent commercial units and rent to restaurant businesses, you’re not going to invest in commercial property in the middle of nowhere. More likely, you’ll find a property in a strip mall or close to an area where people engage in the particular business you intend to rent to.

If you’re investing in residential real estate, consider what kind of person you want to rent to instead of what business you want to rent to. If you want to rent to suburban families, consider how close the property is to schools, hospitals, and grocery stores and how safe the area is. Consider buying property near the city or nightlife areas if renting to younger singles. Ultimately, knowing whom you want to rent to and what that niche is looking for will point you in the right direction.

Consider Hiring a Property Management Company

If you’re not interested in becoming a landlord but want the passive income that investing in property makes, look into hiring a property manager. Property managers are great at maximizing your ROI and helping you get the most out of your investment. For a fee, a property manager will take care of a landlord’s typical responsibilities, such as rent collection and marketing. With a property manager, the passive income you make as an investor becomes a little more passive, as a lot of legal and marketing know-how goes into being a landlord.

With this beginner’s guide to investing in rental properties, you’re already starting on the right foot and on your way to investing in your first property and making passive income.

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