Wanting to Make Money Through Rental Properties?

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Real Estate

Building Wealth Through Renting Homes

by Erin Newman 

The American Dream is typically described as owning a home.  But not everyone wants to own a home.  This is where landlords come in with their product!  Real estate is a wise investment as it is tangible; it is something that can be touched!  The housing boom is affecting all types of people.  Home owners are enjoying increased equity in their homes; real esate investors are enjoying equity being paid by their tenants.  Home sale prices are increasing as well as rental prices.  Lower home inventory is limiting  the inventory of homes.  This is causing many people to rent instead of purchasing.

Rentals are the the norm with certain people.  A reason may be that they were not taught the value of home ownership. People have to live somewhere, so this has been good for the landlords.  The concept sounds easy, but there are things that need to be done to protect the landlord and the investment.  Some investments will be better than others.  Guidance through the process will help achieve a landlords goals.  Just as people are unique, landlords have unique goals.

The first step is to research the area that you are wanting to invest in.  Knowing the local market is a first step in the investment process.  Information on what is most profitable is an important part of the research.  Analyzing numbers, looking at competition, and knowing who the ideal tenant  will play a role in many decisions.  Growth in a market may be an important element.  A community that has increasing growth may be a great opportunity to get tenants that may be temporary in the area.  Many times people will rent in a market as they decide what area is best for them to live.

The research of an area should include demographics of who lives in the area.  Some areas are diverse, but some areas may have concentrated pockets of certain types of tenants.  Areas near a university may have pockets where teachers and professors live as well as pockets where students may live.  Both are different niches of rental income.  Having a game plan for the type of niche that the area may serve may help in the decison of where to invest.  Demographics are important to be aware of.  When dealing with a real estate professional, care must be used in how this information is conveyed.  Fair Housing Rules are in place to avoid discrimination; innocent conversation may sometimes fall into an area of violation.  Care needs to be taken so that all that is done is compliant.

Although real estate investing can be renting or flipping properties, this article is aimed at renting.  Residential rentals are the most common form of real estate investing.  Rentals can involve long term rentals (typically a year or more) and short term rentals.  Companies like Airbnb would fall into the short term rental area.  These can be very profitable if managed properly.  Attention needs to paid attention to local ordinances or HOA rules for these types of arrangements.

So if the investing route is something that is intriguing, the question may be "Show me the money!"  Well. not so fast.  The proper way to get into real estate investing is to have a game plan as well as a business map.  To reap the best profits, this is a business and should be managed as one.  Knowing what the profit and losses are every month will keep a finger on the pulse of the investment.  Adjustments can be made on costs to increase profit.  The money made in real estate investing include rent, appreciation, tax benefits and interest.  Involving a lawyer to advise on the best way to take the title on an investment property (like in an LLC, for example) as well as how to best finance will help to protect your liability.

Taking the time to educate investors is a part of the business model of Erin Newman Fine Homes.  Contact Erin Newman Fine Homes at 480-466-8193 for a free consultation on the steps to get your real estate investing business going today!