Despite what some people may believe, real estate is still a very profitable investment. Buying a home is a good investment, as real estate appreciates in value, compared to a car that depreciates in value. There are also other ways to make money in real estate. For example, when buying a home you can actually use it as rental property and rent it out to tenants, earning an extra monthly income. However, in order to be successful and turn a profit, there are certain things you need to do.
#1: Choose a Good Location for Your Property
It’s true when they say that location is everything in real estate. When investing in a residential property (single family homes, duplexes, and quadruplexes), don’t invest in a property if a lot of people are moving out of that area. This is an indication that there are no opportunities, so people are leaving. Instead, make sure it’s an area that has a low crime rate, has a lot of businesses nearby (job opportunities and places to shop), and has a good school district nearby. These are all things that attract families to areas, and it would also be a good idea to keep track of current real estate trends – keep in mind that the ongoing pandemic will likely have an effect on how those trends manifest themselves.
If you want to go the vacation rental route (also known as short-term rental), make sure to choose a location that sees a lot of tourists. For example, Florida is a popular vacation destination, so many people may be seeking vacation homes in Florida; taking out a loan to purchase rental properties in more populated areas could be a very lucrative investment. There’s beaches, amusement parks, and an endless amount of attractions that the state is famous for.
When investing in commercial property (office buildings, malls, restaurants, etc.), you’ll want to look for and avoid many of the same things. Not too many people will want to rent a building for their business if it’s in a high-crime area. They will, however, want to move their business to a busy area where there are a lot of people shopping— especially new businesses. It’s rare for new business owners to choose a location for their business that is far away from high-traffic areas.
#2: Have a Good Marketing Strategy in Place
Once you’ve purchased your property, you need to let people know that it’s available to rent. This is where digital marketing comes in, or marketing that occurs online. Of course, you can still use traditional forms of marketing, such as ads in a local newspaper or signs and fliers around town. Just keep in mind that digital marketing reaches the largest audience possible, as you may have potential tenants that are not local to that area.
When listing your property for rent, keep in mind that you need to be honest about the property but also detailed. Highlight the property’s best features— features that you know will attract your ideal tenant. Like with marketing towards customers, when marketing towards potential tenants, you must put yourself in their shoes to determine what will make them want to rent from you.
#3: Be an Honest and Responsive Landlord
As a property owner, you’re the landlord, so that means that the maintenance of the building is your responsibility. Your tenants are going to have concerns or something break down— there’s no way around that. So it’s essential to be responsive to their needs and concerns and keep an open line of communication. If you gain a reputation as a bad landlord, word will get around, and not many people will want to rent from you in the future. On the other hand, when people hear that you communicate with your tenants and take care of all of their problems, you’ll see more people wanting to rent from you as you acquire more property.
If you know that keeping up with a property will be too much for you (and it is a lot of work), you can hire a property manager to do the work for you. Just remember that the property manager you hire will still be a reflection of you, so make sure you go with a trustworthy person from a property management company. Also, this will not only help you determine if you’re ready to invest in real estate but taking this route is an added expense to consider as well, since they’ll need to get paid too.
Many people have made a secondary income from investing in rental properties. The key is to do your research and to be attentive to your tenants, whether you’re the landlord of a vacation rental, residential property, or commercial property.