Being a real estate investor has huge upside-if you have money to invest and know what you're doing. Consider all the pros and cons and get 8 tips on how to buy a profitable rental property.
Money Girl
172 MG Should You Buy Rental Property?
Are you struggling to close deals? Cold outreach is wasting the time of both the buyer and seller at every stage, especially when sellers are using outdated data. Your organization can overcome these challenges with LinkedIn Sales Navigator, the first deep sales platform. Right now, you can try LinkedIn Sales Navigator and get a 60 day free trial at LinkedIn.com/trial. That is LinkedIn.com/trial for a 60 day free trial. At LinkedIn Sales Navigator, help you sell like a superstar today. Hi friends, thanks for downloading many girls quick and dirty tips for a richer life. I'm your host, Laura Adams. With so many distressed listings and foreclosed homes on the market right now, the idea of investing in real estate seems to be gaining popularity. If you're wondering whether you're cut out to be a landlord, I'll tell you in this show. Owning real estate certainly has its pros and cons. Let's start with the good stuff. It can be very profitable. Real estate is a tangible asset that you control and everyone needs a place to live. You can make money with real estate in two basic ways, cash flow and appreciation. Cash flow or income results when the rent you collect from a tenant exceeds your total expenses. Expenses for a rental may include the mortgage payments, property taxes, insurance, maintenance and repairs. Appreciation is the increase in value that a property can experience over time. You might buy a property in a good neighborhood that needs repair. If you're handy and like doing fix-up work or have enough profit in the deal to hire a contractor, you can make the repairs and sell it for a profit or keep it for a rental. Some people like to invest in multifamily properties that are already making money or one where they can live on site in one of the units. Or you could buy a vacation home that you rent out on a weekly or monthly basis and use for yourself part of the year. Once you pay off the mortgage on a rental property, it can be a nice source of extra income while you're still working or during your retirement. So how you structure a real estate investment depends on your resources, how long you intend to own the investment, and the features of the property that you buy. Once the advantages sound so great, I have to give you a dose of reality to balance them out against the disadvantages. Managing investment property and being a landlord is a tough business. I can tell you from experience that it's easy to underestimate the costs of repairs when you're repairing a fixer upper. It's also hard to deal with tenants who call late at night with a clogged sewer system or who don't pay their rent. I've had tenants disappear in the middle of the night and leave furniture and closets full of stuff for me to deal with. They can damage your property or have problems that they never report to you. Unexpected vacancies can drain all the profitability out of an investment too. No, being a landlord is certainly not for the faint of heart. Therefore, buying a rental property or a fixer upper is a business decision and you need to crunch the numbers for it very carefully. I'll give you some resources like investment calculators and spreadsheets to help you do that on the blog at moneygirl.quickendirtytips.com. The bottom line is that you have to be completely confident that you can make money no matter if you have higher than expected vacancies or lower than expected rents and appreciation. Here are eight tips for buying rental property. Number one, be sure your personal finances are in order. Never buy a rental property if you don't have a healthy emergency fund. Remember that you'll be responsible for mortgage payments and repairs even if there is no tenant. Number two, get pre-approved for an investment loan. Sit down with a mortgage lender or broker to find out if you can afford to make an investment before you spend a lot of time searching for a property. Number three, research going rents. Ask real estate agents, property managers or other renters in the area how much you can realistically expect to charge for rent. Number four, buy properties and good locations. The quality of the neighborhood is important for keeping good tenants. Are you struggling to close deals? Cold outreach is wasting the time of both the buyer and seller at every stage, especially when sellers are using outdated data. Your organization can overcome these challenges with LinkedIn Sales Navigator, the first deep sales platform. Right now, you can try LinkedIn Sales Navigator and get a 60 day free trial at LinkedIn.com/trial. That is LinkedIn.com/trial for a 60 day free trial. Let LinkedIn Sales Navigator help you sell like a superstar today. AI might be the most important new computer technology ever. It's storming every industry and literally billions of dollars are being invested. So buckle up. The problem is that AI needs lots of speed and processing power. So how do you compete without costs spiraling out of control? It's time to upgrade to the next generation of the cloud, Oracle Cloud Infrastructure or OCI. OCI is a single platform for your infrastructure, database, application development, and AI needs. OCI has four to eight times the bandwidth of other clouds, offers one consistent price instead of variable regional pricing, and of course, nobody does data better than Oracle. So now you can train your AI models at twice the speed and less than half the cost of other clouds. If you want to do more and spend less like Uber, 8x8, and Databricks Mosaic, take a free test drive of OCI at Oracle.com/advanced. Take a look at the proximity to employers, schools, parks, and public transportation. If you plan to manage a rental yourself, be sure that it's fairly close to your home. Number five, make purchase offers contingent upon inspections. Always pay to have professional inspections made so you can determine what repairs may be needed and if there's evidence of pest damage. Number six, get ample insurance. You need to have plenty of liability insurance to protect yourself in case someone is hurt while they're living in or visiting your rental property. Number seven, know the rules. There are federal and state laws regarding rental property that you must not violate. Visit nolo.com for information about the landlord tenant laws. And eight, consider the services of a property manager. After years of managing my own rental properties, I turn them over to a professional. Even though a property manager charges around 10 to 15 percent of the gross rent they collect, to me it's well worth it. If you want to circumvent all the hassles of managing a property, be sure to add the expense of a professional manager into your calculations before you decide to buy a property. There's no guarantee that real estate values will increase as much in the future as they did in the past. Rents and home prices can go up and down and are very different from one town or even one neighborhood to the next. And if you're cut out for it, buying real estate can be a great way to diversify your investments. Be sure to follow me on Twitter or Facebook. You'll find links to those sites as well as my email address and voicemail number under the Money Girl section at quickanddirtytips.com. I'm glad you're listening. Cha-ching. That's all for now. It's hard to see if Money Girl, your guide to a richer life. [MUSIC]