Category: Rental Properties
Traditionally, investors have looked for quick returns by flipping homes, but with the current home market still struggling in most markets, home flipping might not be the route you want to go.
While flipping can be lucrative, it can also tie up your money if the home doesn’t sell immediately. Plus, it’s a one-time benefit once the house sells.
Renting out a property can provide income month after month and free up your cash flow to invest in other places.
Investors should enter the market with caution because it is easy to underestimate the costs of repairs and upkeep on your rental unit. A good rule of thumb is to calculate anywhere from 7 to 15 percent for these unforeseen repairs, depending on the age of the rental property.
Here is some advice to keep your rental money flowing in the right direction.
Look for real estate with great potential. Properties that tend to do well are near schools, expanding retail or trendy points of interest, local transportation, or surrounding shopping centers.
Keep your options open. Consider smaller markets within secondary markets, how well the house was built and how much people are paying rent in the neighborhood. You want to be in the $800-to-$900 range in the secondary market for rental properties.
Renovate the kitchen and bathrooms to get higher rent. Quality granite in the kitchen could save you resurfacing costs, and bring in an extra $50 to $90 per month. Be sure to know how much renovations cost so that you know if you’re getting a fair bid.
Screen the tenants. Have an application process and use a service such as National Tenant Network to look for civil and criminal lawsuits, recent collection activity and credit scores above 600. Look for people who were down financially, but now are on their way up with a good job and some savings, who have been paying their bills for the past four years.