If you’re looking for a reliable means of making passive income, you’ve undoubtedly already considered an investment property. While you can eventually set up investment properties so that they make you money with minimal effort, the process of establishing this income stream is anything but passive! You’ll have to put in some effort and money first.
The Property Management Coach helps newbie investors like yourself achieve their dream of collecting passive rental income off an investment property. This guide offers a basic intro.
Decide on a geographic area
Location is critical when buying an investment property. You want to target an in-demand area that will be attractive to potential renters. Coastal areas like Santa Cruz are a perfect example, drawing residents and tourists alike with the beach life. Beyond the general geographic area, also consider practical factors like proximity to public transportation.
Know what to look for in a house
Of course, location is only one element of what makes an investment property great. Auction lays out some of the other desirable assets of an investment property, like being low maintenance and having the potential to appreciate in value over time. If you ever decide to sell the property, this will be a big boon.
Do the financial calculations
When buying an investment property, it’s advisable to follow the 1% rule. According to this logic, you’ll want to bring in a monthly sum worth at least 1% of the total amount you invested in the property. So, if you buy it for $200,000 and invest $50,000 in renovations, you’ll want to bring in $2,500.
Make your offer
If you’ve found a house that meets all your criteria for an investment property and makes sense financially, you can go ahead and make your offer. House Beautiful has tips for making a winning bid in a competitive real estate market. In addition to bidding over the list price, you may also want to consider contingencies and clauses to make the offer stand out.
Spruce up the property’s interior
It’s unlikely that your investment property will be ready to hand over to tenants as soon as you get it. Sprucing up the inside will make it more desirable and ramp up your profits in the long term. Start with simple steps like a fresh coat of paint and upgraded bathroom and kitchen fixtures. You can then go on to address aesthetic details, like replacing light fixtures.
Enhance the exterior curb appeal
In addition to addressing your property’s interior, invest some time into improving the exterior as well. Landscaping can improve curb appeal, making for a more positive first impression. Basic tips include creating a lush lawn, pruning trees and shrubs, repainting the front door, and washing the windows.
Determine a vetting process for tenants
Once your investment property is ready for move-in, you can go on to the next task: finding reliable renters. Money Crashers provides a guide to screening potential tenants. In addition to running a credit and background check, you can also contact previous landlords. Ask about critical issues like whether the renter was ever disruptive or late in payments.
Make sure to maintain your property
An investment property requires ongoing attention. To maintain the property’s value and ensure you can attract the best tenants, you’ll have to regularly take care of home repairs and landscaping. If you don’t want to do this yourself, a property management professional can take care of it for you. Decide in advance whether you want to entrust the job to a pro.
As you can see, making money from an investment property isn’t something you’ll accomplish overnight. However, putting in the time and effort to complete the steps above will set you up for long-term success.
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Contributing Author – Jennifer Scott can be reached at . Check out her website for more info SpiritFinder.org.