A rental is a property that the investor controls and is rented out to a tenant for a specific monthly “fee.” Rentals are an excellent way of owning property, building your real estate portfolio and making a positive cash flow from them at the same time.
Rentals can run the gamut of brand new homes purchased before anyone lives in them, to dilapidated old homes that need extensive renovations and repair. Depending on the condition of the property you acquire, area value, and repairs needed, purchasing properties as potential rentals is a good way of getting passive income. In the short term you won’t get the larger fee you would on a rehab or through wholesaling, but in the long term a rental could net you more of a payday.
Rentals do have some specific issues that must be addressed. For instance, the type of neighborhood your potential rental is in will influence both the types of tenants that are attracted to the property and how often your rental will face vacancies. As an example, if you buy in a neighborhood near a college or university, there is the chance that the number of potential tenants will largely be made up of students who, during the summer months, will go back home. You may likely face vacancies and more repairs with your rental on a fairly regular basis and vacant properties don’t bring in any money. You still need to pay mortgage, taxes, and other expenses for an empty house. Every month that goes by without a tenant is more money out of your own pocket.
If the neighborhood has a reputation for high crime, high property taxes, or lots of properties regularly going up for sale, you may be limited on the number or quality of tenants interested in your rental, or on the price you can charge for your rental. The local job market, property taxes, location to amenities such as grocery stores and schools, can all influence the type of tenants that will be interested in your rental, the potential for frequent turnaround of vacancy, and the amount of rent you can charge.
Rentals can sometimes have unexpected issues or problems because even though you may think you have the perfect tenant for your home, you really don’t know how they will treat or take care of the property. And even with a great paying job, tenants can face financial issues that will cause the rent to be late or missed. References and credit checks don’t guarantee a problem-free rental. You need to have a supply of funds tied up and always available to cover issues with rent and minor repairs or replacements that may crop up irregularly. You are still responsible for paying the mortgage each month. If rental payment issues cause you to be late or miss your own payments on the property, then the rental is not working in your favor.
On the other hand, rentals have a huge potential of bringing in monthly income that pays for the mortgage and taxes on the property and puts money into your pocket. Some of the cash flowyou make from rentals should be set aside to be used in cases discussed previously such as repairs or rent payment issues. As yourprofit accumulates you will be able to keep a contingency fund available and use the excess profit as you please.
To us, personally, rentals have been a blessing. We of course have experienced many ups and downs, but overall during the last five years our rentals have provided for us a lifestyle that we love living every day! We are completely worry-free about our bills because we know that our rental income will cover them. We can help others and assist where needed. We can dictate our time as we wish and spend time with friends and loved ones. So much is available to you when you don’t have to struggle to find money; and money comes to us every month—effortlessly.
To create this life we started on a sturdy foundation by learning real estate investing through real estate wholesales. We took action as we learned from mentors, coaches, books, and training material. And we have never stopped learning. Form wholesales we were able to save up some money to invest it on rehabs and accumulated even more money. Then we started to acquire rental properties and the rest is history.
Today we do wholesales, rehabs, and rentals and we love it all! We keep accumulating cash, we keep building our real estate empire, and these same results are possible for anyone! Like we said before, building a real estate business that gives you the financial freedom to live your life on your terms is not super easy, but it’s not super difficult either. To learn more about our story and how we help others build their real estate empire, find us at www.cashflowpropertiesacademy.com.
Rentals are the next step above rehabs in that you own the property and are responsible for it. But rentals have great potential in bringing lots of passive income, especially if you have multiple rental units to profit from. This is truly where freedom happens!