How To Actually Make Money Off a Rental Property
Whether you’re near retirement age or already living your so-called “Golden Years,” the term
“passive income” probably sounds quite nice to you. While there are several passive income
opportunities available, one of the most lucrative — and consistent — involves renting out
property.
That said, being a landlord is not a walk in the park, and many newbies make costly mistakes. To ensure you don’t jeopardize your hard-worked-for savings, take the time to learn the ins and outs of the business and to understand what it really takes to be successful with your first rental property.
Shop Smart
Your ability to earn an income off of a rental property ultimately comes down to one factor: The property itself. Not only does the property need to appeal to potential renters but also, it needs to be affordable enough that you can cover the cost of the mortgage and then some with monthly rental payments.
Of course, appeal and affordability are going to vary drastically depending on where you live, but experts advise to always buy in the entry-level price range for your area. They also suggest shopping only in nice or up-and-coming neighborhoods with economically stable environments.
You want the property to appreciate over time so that it continues to work for you.
Shop for single-family homes. Though condos are nice, they can drastically limit to whom you
may rent. Additionally, many condos do not allow owners to rent out properties until after the first year, and many come with association fees.
Finally, look for fixer-uppers on which you can perform the repairs yourself. Fixer-uppers have the potential to offer far greater profit margins than newer homes, even after you factor in the initial vacancy and cost of repairs.
Boost Your Property’s Appeal
Once you have the keys to your new investment property, it’s time to get to work. Start from the curb and work your way inward. Some tasks to add to your to-do list include the following:
• Boost curb appeal by cleaning up the lawn, tossing out any debris in the yard, planting some shrubbery or flowers, and applying a fresh coat of paint to the front door, trim, shutters and mailbox.
• Fix what needs fixing, no matter how much it may cost you. Tenants do not want to live with
leaky roofs, faucets that don’t work and doors that don’t shut.
• Paint everything. Paint gives a lived-in space a clean, fresh start.
• Clean, clean and then clean again. Check surfaces, corners and windows for dust, cobwebs,
streaks, dead insects and other turn-offs.
• Pay attention to the finer details. Do the door handles all match? Are the outlets safe? Are
the appliances clean and do they function properly?
Find the Right Renters
Second to the property itself, the key to your success lies in your tenants. When you rent to the right people, you can drastically cut down on repair bills and the cost of managerial duties. You can also have peace of mind that they will not leave you high and dry.
The right tenants will have a steady stream of income with which to pay rent each month. They are nice, honest people without a history of property destruction and who can provide two or more personal references. They are the type of people who, if they decide to move out, will give you plenty of advance notice so you can find new tenants. Do your due diligence to screen tenants, and you will be rewarded.
A rental property can be a great way to make a passive income but, like with anything in life, it is what you make of it. If you keep the above three tips in mind, though, you should have no problem supplementing your retirement income with rental income.
