What You Should Know Before Investing in Your First Rental Properties

Real estate can be a highly profitable investment. Because real estate values generally rise over time, you are reasonably sure to get a good return on your money when it comes time to sell.

Add renters in there, and you’ve got your investment largely paid for. However, it is important to do your homework before purchasing your first rental properties. Here are a few things to know.

Know Your Vision

Investing in rental properties might be your side hustle or your full-time career, but either way, it takes significant amounts of time and resources to manage your investments properly. This means that you shouldn’t go into it haphazardly.

Create a vision for what you want to accomplish, including how you plan on getting there and what it will take to achieve your goals. Maybe you are happy with one single-family investment property.

Or, you might be working up toward owning several multi-family homes and apartment buildings.

Whatever your goals are, write them down and create a plan, with short-range, mid-range, and long-range goals.

It Takes Time

Rental properties can be time intensive. Between finding renters, giving showings, signing leases, and performing routine and emergency maintenance, you will have a lot to do.

Before you invest in rental properties, assess how much time you can give to managing your properties. If you find that you lack the time, you are physically unable, or your properties are at a distant location, you might want to hire a property manager.

Outsourcing management can help with 24-hour property maintenance.

It Takes Money

As they say, it takes money to make money. Not only do you have to account for the mortgage costs, but you also need to include operating costs into your budget.

You need to be able to cover repairs, updates, cleaning costs, and lawn care, as well as any property management fees that you owe.

You will also be expected to pay tax on any income that you make from your investment property.

However, don’t forget to keep careful records of all your expenses, as these can be counted as tax deductions.

In addition to your mortgage payment, operating costs, and taxes, you should be able to cover the rent if your property is empty for a time.

If you have extra funds and are patient, organized, and ready for a new challenge, you might find investing in rental properties to be the best way to grow your money.

Just make sure that you are ready for the amount of time and money you will need to put into it to be successful.

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