Whether you’re trying to expand your portfolio or you’re new to investing altogether, it can be tough to decide which new venture you’d like to try. If you’re intimidated by volatile stocks and other unpredictable markets, you should consider investing in real estate.
Real estate investments are stable and lucrative, making them great options for first-timers and safe choices for seasoned investors seeking to enter a new market. You could purchase properties to flip and make a nice profit, or you could seek out rental opportunities for a reliable long-term income source.
If you choose to purchase a rental property, consider the following tips to help you succeed.
Analyze Property Options
The first thing that you’ll be tempted to do when you decide to invest in real estate is scope out properties. While shopping around is important to get a feel for the market and its offerings, you should be cautious when choosing your property.
For long-term rentals, you’ll need to consider the property’s location. Check out aspects like crime rates, school systems, public transportation, and shopping options near your property before purchasing. Renters with families will consider these factors before choosing a place to rent and you’ll want to be a competitive option.
When buying an Airbnb vacation rental, you’ll need to analyze the market in your desired area as well. With online tools, you can track how your competitors perform on rental platforms like Airbnb and see stats like occupancy rates and potential revenue to decide if the property you’re considering would offer a good return on your investment.
Consider Your Finances
If you don’t have much experience investing, buying a rental property outright could be a big leap. You may not even have the available capital to make the purchase on your own. If that’s the case, you could take out a loan to finance your purchase and get your foot in the door.
After considering how you’ll finance a large purchase, you’ll need to think about how to get the best return on your investment. Choosing the right type of rental will hugely impact your earnings. Long-term rentals will provide consistent income, but it is more static than that of short-term vacation rentals. Short-term rentals allow you to adjust nightly rates as you please, meaning that a heavily booked vacation property can earn significantly more in one month than a traditional rental would.
You should also get familiar with the tax incentives of owning a rental property. Many property expenses and maintenance costs–like mortgage interest, property insurance, repairs, and utilities–are deductible. This is one of many reasons that the expenses of a rental property turn out to be non-factors for successful investors.
Weigh Maintenance Responsibilities & Costs
On that note, you’ll need to think about how you’ll handle property maintenance. Some investors choose to serve as property managers and landlords themselves and DIY their maintenance and repair jobs. Before you make a property purchase, you need to consider if you’re willing and prepared to maintain it yourself.
However, if you live far from your rental property or you’d prefer a hands-off approach, you will need to hire professionals to maintain your property. Budget for cleaning and repair services when you develop your financial plan.
Keep in mind that short-term vacation rentals will likely face less tenant damage than long-term family rentals. That said, rental platforms like Airbnb require hosts to be available to their guests and renters 24/7 to answer questions and offer support. Even if you manage all other aspects of your rental remotely and through outsourced teams, you’ll still have to provide some customer service.
Market Your Rental
Lastly, you’ll want to make sure to market your rental to get the most out of your investment. Vacant rental properties won’t make you any money, so you’ll need to get the attention of prospective renters.
One of the best ways to market a rental is through social media, which will allow you to post photos of your property and engage with interested renters. You can display your property’s rooms and amenities, post about rates and conditions, and answer any questions to ensure that your target audience is up to speed on your offerings.
For vacation rentals, you can use social media to advertise rate changes based on demand and market performance. If you’re going through a dry spell during your location’s off-season, you can advertise low rates on your social media pages and get some unexpected traffic.
These tips can help you understand your rental property investment options and develop the right plan for you. With these factors in mind, you’ll be making money on your new property in no time.
