If you’ve got some cash saved up you may want to consider how you can use it to make even more money. Sure, you can keep it in a savings account and reap the interest, but that can offer fairly low returns. It might be a safe option, but many of those who want to see higher returns consider buying a property to rent out. So, should you be considering that option too?
Do you have the time?
First and foremost, do you have the time to dedicate to the project? It’s not just a matter of buying an apartment, advertising it, and then waiting for the monthly income to start rolling into your bank account. There’s going to be a lot of planning, stress and effort involved, so you’ve got to be sure you can commit. We’re not talking about a small sum here, so you don’t want to be lazy and cut corners and risk making big mistakes.
You’ve got to remember that along with scouting out the perfect property you’ll also have obligations as a landlord to your tenants. That means being contactable to them, ensuring repairs are carried out, and all the other tax and admin issues that comes with that. It’s a fairly heavy burden to take on and if you can’t do it properly you’ll soon find yourself in trouble.
You can mitigate this by employing the use of a realtor. They can help you set a rent for your property, deal with the tenants, organize repairs, and generally take on a lot of the paperwork. This gives you a much easier role in the whole process – but it will eat up some of your return in fees.
Should you fix up a place?
By buying a property that’s a bit rundown you can save a lot of money on your original investment. It’s a common tactic where people will then sell the property at a later date with a decent profit after doing the place up. It’s a good idea, but does it work when you want to rent a place out?
Again, you’re going to have to consider the amount of time you have. Redecorating and modernizing a place means you’ll be able to charge much more rent, but if you pour loads of money into it it’s going to take you much longer to recoup that. To bring down the costs you could do the work yourself, but this can be time consuming.
There’s always the chance of things going wrong. Delays and problems mean extra cost, especially if you’ve hired laborers to get the job done. You have to spend a lot of time weighing up the pros and cons. Bear in mind that the money you think you’ll save in fixing up a place could never materialize if things don’t go to plan.
Location is integral
Where you chose to buy a property is also going to be a crucial factor. Average rents vary hugely by state. As you’ll be able to see in Arkansas fair market rent for a two-bedroom home is $653, while in Hawaii it is $1,640. That’s a difference of over 150%. Consequently you’re going to have to put a lot of time into deciding where to buy.
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