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Investing in rental property for fun and profit

Investing in Rental Property for Fun and Profit

If you are looking for a way to create a steady income stream for yourself or to build equity without paying rent out of your own pocket, rental property may be a good option for you. Many people are enjoying significant returns on their investments today and you could be one of them. While rental investment is not a “get rich quick” scheme, it is the vehicle that many people have achieved prosperity with. Careful investing in rental properties can result in an impressive return over the years.

Rental property carries with it the advantages of acquiring a new stream of income, a new asset and a tax break for all costs associated with the upkeep of the property and dealing with renters. Many people have bought property, rented it out and used the rent to pay for the mortgage, thus providing them with “free” equity.

While rental property is not a “work-free” source of income, it does not have to be looked after every day, which means that you can go on vacation and still have that income. If you are handy with tools, you can save money by repairing and maintaining the property yourself. You will, however, need to decide if you can deal with the irregular demands on your attention that a property may create, or if you want to pay a management company to deal with the desperate call at 3 AM about a backed up toilet.

When looking at a property in terms of future rentals, you need to think about what renters are going to want. Is the property near amenities such as shopping, dining and recreation? If you’re looking at a property in a “college town”, is it convenient to the college or university? How about local schools? What about proximity to negative things, like a railroad or commercial loading bay that operates 24/7? Visit the property several times, at different times of the day and week to really get an idea of its true character.

You will also be dealing with a lot of people in the course of your rental career. At least some of them should be professional inspectors and real estate professionals who can tell you what inspections, agreements and disclosures you will need to minimize the chance of getting bad tenants or even being sued. You will need to decide if you are going to allow things like pets or not. You need to have a solid lease that clearly states what the renter is and is not allowed to have or to harbor as part of the agreement.

It’s worth taking the extra time to find out about the people you are considering renting to. Have them fill out a rental application and check their references. Don’t trust that what they say is true, even if they appear to be “nice people”. People who will trash your property can wear nice clothing and say all the right things, too.

Be careful about renting to friends or relatives. While it would be nice to help someone out in hard times, beware that this could mean that you are providing free rent to someone who is never going to pay you back. A monetary relationship can also result in the loss of friendship, so be careful and think how you are going to handle a bad situation. If you are using this property as an income stream, you will have to treat any friends or relatives you rent to like any other renter.

It’s a lot of work, but it can be rewarding to own rental property. However, this is not the route for everyone. Only you can decide if you want to take the time, energy and money to invest in this venture. If you are prepared to invest a lot of money at the start, deal with tenants and keep the property in good repair, you will be on the right track for a rewarding source of income and equity.

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