In short, yes, rental properties are and can always be a very good investment. Saying that, investing in rental properties isn’t for everyone and, no matter what, you’re going to have to do your due diligence in order to get a worthwhile return.
First of all, if you are interested in investing in rental properties you are going to need a considerable amount of money to use as a down payment. On top of a down payment you are also going to need to prove that you have an adequate amount of extra savings as well as enough steady income to be able to make all of the necessary payments.
You will typically be able to receive a loan on a rental property with four or fewer units if you put down 20% and have solid credit. For the most part, though, all lenders are going to want proof of three months of reserved capital as well as proof that you can afford your current expenses on top of the newly acquired mortgage for the rental property.
So yes, there are many hurdles to get through when starting with an investment in rental properties. But, more important than those initial hurdles is your intuition in knowing whether or not a specific rental property is going to give you a positive cash flow, especially after expenses like home repairs, vacancies and maintenance costs are taken into account.
Here are some tips you need to consider:
- You’re going to want to make sure you do your research. By talking to other real estate agents and mortgage brokers you can get some more perspective on a specific property.
- Next it comes down to making your decision on becoming a landlord. You will see that, very early on, it becomes all-or-nothing.
- Of course any good investment makes real money, so you’ll need to crunch your numbers and figure out how much money you can estimate to make and spend for each potential investment you’re looking into.
- While you’re crunching the numbers on your ROI you also need to take a look in your bank account and make sure you personally have the money for a very sizable down payment, as well as enough reserve capital to be ready for all kinds of repairs and a significant, steady income that will impress the banks.
- Once you’ve gotten through all of these steps, you’ll lastly have to prepare for hands-on management, especially considering 10% of your rents collected will more than likely have to go to day-to-day repair work.
Of course not everyone is interested in this aspect of being a landlord, and that’s because it takes a fair amount of work.
That's where good property management comes in, and it’s something that can save many headaches for rental property investors without jeopardizing the investment’s returns.
So if you are considering a rental property investment and you feel like you’re qualified and up for the task, then you are in a great position to make a lot of money.
It’s the combination of your investment in a worthwhile property and a good property management team that puts you in an extremely easy and lucrative position. Let us at Zenith Properties be your partner as you chart your way to success. Start the conversation now!