Buying rental property can be a solid investment with returns far exceeding what you would typically earn in the stock market. There are countless benefits of buying rentals according to T-Square Real Estate Services team – but – as a beginner investor, you might be wondering whether or not there is a potential for extra profit that is worth the risk and headache of being the owner of rental property.
The question is how exactly can you profit from a rental property.
Why Invest in Rental Property?
One of the biggest cons of investing in real estate is the ability to use leverage. Generally, banks lend the majority of the money needed to buy rental properties where the investors only need to put approximately 20% down.
Compare this to asking the bank to lend you money on a stock purchase, and you will be met with silence as you will be politely escorted out of the building. The underlying reason is that stocks are seen as a more risky and volatile asset compared to rental properties, which is why many investors prefer to conduct a right to rent check online before committing to property investments
This potential leverage can substantially increase returns, especially when things go well. However, the act of borrowing money can also increase risk when property prices are on the rise, the potential return on equity is much higher than if you were to directly own the property.
As a property owner, you might want to know the benefits of renting out your property, and cash flow might be one of the most crucial factors to consider. You will want to keep in mind that today’s rental rate won’t be the same in a year.
The Importance of Having Good Tenants
When it comes to rental property, you will want to know the importance of retaining a good tenant because a rental property is only as good if it is not vacant. Before we move on to the tenants, you will want to ensure that you have the best property management service to optimize your monthly cash flow.
Usually, professional property management services include specialized services, such as remodeling services of the rental property, rent collection services, and eviction services. These aspects make renting out property and managing your rental property so much easier.
About the tenants, you will want to ensure that they pay rent on time as a way to avoid late fees. The best thing to do is to set clear expectations from the very beginning and ensure that the contract includes the following details:
Rent amount
- Due date
- Grace period
- Late fee amount
- Consequences in case of non-payment
When crafting the lease, you will also want to include your preferred payment methods and communication channels. To encourage your tenants to pay their rent on time, you can offer small incentives, such as discounts or free cleaning services. Sometimes, the smallest things go a long way in maintaining good tenants.
Of course, you will want to improve your interpersonal skills as a landlord as well. Emotional intelligence is key when it comes to human relationships. You will also want to be flexible and understanding as your tenants might face unexpected emergencies, which might require them to ask for an extension.
