Flipping, wholesaling, selling houses as a Realtor – those are all great ways to make money.
However, once you stop doing those active income activities the money stops too.
With passive income the money keeps coming in each month from work you already did. Passive income accumulates and has unlimited scalability. Rental properties are one of the best passive income assets because they provide recurring income.
Passive income via rental investments comes with several other benefits like depreciation for taxes, appreciation in value, and you can leverage other people’s money to buy them.
Here’s Why Rental Properties are the Best Source of Passive Income
There are multiple ways of getting into the passive income game, but if your goal is to limit risk as much as possible while still making an excellent profit, investing in rental properties might be right for you.
Wholesaling, flipping houses, working for commissions – you can make thousands or even million dollars doing that, but the problem is you have to keep doing it. All the other money-making strategies I mentioned are good, but at some point, you’ll get hurt, or you’ll get sick of it. The money stops, but that’s not true with rental properties.
Investing in rental properties is a much safer and surer way to get rich because it’s passive income. Rental property investing means having your money work for you while you sleep! All you have to do is keep collecting that monthly cash flow or sell off the property when the time is right. The key is in the long-term investment, not short-term gain.
How to Buy Your First Rental Property
So you might be thinking by now: “How can I buy a rental investment in the first place?“
Figure out a strategy so you can buy rental properties using your wholesaling or real estate commissions. Maybe you’d sell three houses, wholesale three, then buy one rental from your profits.
One of the most important factors that go into making any real estate transaction a success (or failure) is location – where are the houses? An up-and-coming area or near schools make especially good sites for rental property investments because land prices tend to go up over time as the neighborhood becomes more desirable.
The next question to ask is what kind of rental property are you looking for? There’s a lot of variety on the market, with some homes built specifically for short-term rentals and others that can be rented out by long-term leases.
If you’re still starting out, try to buy a small property in the area where you live. A multifamily building or duplex will do.
How do you find properties? You can look on sites such as Realtor.com, Zillow.com, Trulia .com, Craigslist, or through local papers and websites about what’s available locally so that you’ll know the details even before you go visit them face-to-face.
A good rule in real estate investing is “the higher up you go, the better”. But if you’re new to this game, start out at ground level before trying anything too fancy like buying an apartment building (unless you know exactly what you’re doing). The key here is don’t overdo it – just because you’ve got a good amount of money saved doesn’t mean that you should invest it all at once.
If you want to buy new buildings from scratch, consider multifamily homes such as townhouses. Since there are more units available than single-family homes, you can accommodate more tenants per property.
How to Make Your Rental Properties Profitable
The best way to keep your rental properties running smoothly is by keeping the property well maintained. This includes regular repairs and giving it a fresh new coat of paint each year or so.
One strategy that you can do if you’re still starting out is to live in one of your rental properties. You can make gradual improvements on the property while also have a place to call home.
The other thing that will determine how profitable a property investment will be is your monthly expenses. Taxes, insurance, mortgage payments, maintenance costs for upkeep, and repairs on common areas of the building like hallways or landscaping around it will cost you money. Make sure these are covered before deciding whether putting money into rental properties would make sense for you.
Conclusion
There’s no doubt about it: buying rental property investments can build long-term wealth and a steady income stream while minimizing risk. Don’t wait until retirement age before you start buying your first property.
This might sound too good to be true. It’s important to keep in mind that this isn’t going to happen overnight – but with patience, hard work, and an eye for detail things will eventually get to where you want them.
If you want to build long-term wealth using rental properties, the key is doing your homework first.