Deciding to invest in rental properties can be a great idea. However, there are quite a few things you should know about if you want to be successful. It is strange that so few people consider rental properties as an investment, even though the returns can be so high.
The first thing is to find something with a good return on investment. Real estate is an illiquid asset that require you to take money out of your liquid assets. You need to strive to get a return rate that is the same as what it was on your liquid assets. In other words, you want a good cash flow property, and not a property that will only cost you more money.
Investing in real estate, therefore, shouldn’t be about the appreciation, but rather about the cash flow. The cash flow of a property is the money you have left over from the rental price after you have paid for all the necessary bills in relation to that property. If you can, try to leave your cash flow alone in a bank account to create significant savings. Additionally, as your rent goes up over time, so will your cash flow. Best of all, your mortgage payments should stay the same. You should make sure that at least 20% of the money you get is cash flow. Spend some time using the internet to work out exactly how much your cash flow is.
If you don’t have a lot of money to invest in a property yourself, it is easier to get started in this world if you are still young. 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, if you are a bit younger, banks may be slightly more understanding. There are many other things to think about as well. Finding the property is an entire enterprise on its own. However, even this requires a whole lot of research and analyzing. 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. You will then need to look into what it means to be a good landlord, something that will take a considerable amount of time to learn. Don’t let this put you off, however.