The real estate business has played a vital role in uplifting small-time investors into real estate billionaires because its market is incredibly lucrative when played right. These people manage to make it big because they played the real estate market well, and they understood what makes a real estate mogul.
Many investors start their real estate careers by buying rental properties because it carries relatively lesser risk as compared to other avenues in the same market. Buying rental properties on triple net lease agreements is an absolute favorite among investors because they can conveniently generate passive income from these avenues. You can read more on NNN lease agreements on the internet, but we have provided you the ultimate guide to invest in rental properties so that you do not end up making some obvious mistakes.
- There are different types of rental properties:
Before investing in rental properties, you need to understand its taxonomy and which type of rental property suits your future investment plans. In totality, there are three major types of rental properties; traditional rentals, vacation rentals, and turnkey rentals. As the name suggests, traditional rental properties operate on long term contracts in which you rent out a property to tenants for at least a year.
Vacation rentals have become quite common in the past few years due to the burgeoning tourism and the advent of websites like Airbnb. Vacation rental properties operate on a short term basis in which they are rented out to tenants which are mostly tourists, and they do not occupy the property for more than a few days. The third type, turnkey rental properties are perfect for novice investors who do not have a lot of experience in property management. Such is the case because these properties are bought from companies that are themselves responsible for finding tenants on long term contracts and managing rents coming from these properties.
- Making money with rental properties:
Typically, people know about the passive income they will be able to generate with rental properties, but there are many other perks associated with such properties. More often than not, the value of a real estate in the housing market increases if you have bought a property in a strategic location. It means that as time passes and the value of your investment properties increases, you will be able to sell your property at a much higher price as compared to your initial investment. Moreover, real estate investors get a lot of tax exemptions as well, which considerably supplements their non-taxable income.
- Location matters a lot:
Buying a below-par property in an excellent location is much better than buying an excellent property in a below-par location. Therefore, before investing in a property, do thorough market research to better understand the dynamics of variables like property prices, rental rates, and occupancy rates. Moreover, you need to understand that real estate trends keep on changing and what was once a decent neighborhood may not be worth an investment in the current times. Therefore, keep a close tab on the recent real estate trends and what are the hottest areas to invest in the next few years because it will help you buy a top property in a top location.
- Hire a real estate agent:
It is highly advised to not execute a real estate transaction without the help of a competent real estate agent, especially when you are just starting your career as an investor. A real estate agent will take care of the marketing of your property and he will ensure that your advertisement reaches the right buyers, and you get the best price.
- Get hold of your financials:
You cannot simply jump into a bidding spree for a hot property without considering your financials. You need to understand that the property you will end up buying may not result in immediate returns. Therefore, take a hold of your financials and make sure that you have enough monetary back-up to support yourself if your investment property remains vacant for a few months.
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