In today’s day and age, a lot of people earn money via nontraditional methods. The standard 9-to-5 workday is giving way to side hustles and passive streams of income.
If you are interested in escaping the rat race, you should consider purchasing a rental property. In this article, you’ll learn if this passive stream of income is right for you and how to get started with it.
What Is Passive Income?
Before we
dive into the ins and outs of owning a rental home, you should be familiar with
the concept of passive income.
Passive
income is money you earn without exerting a lot of effort. While it does require
some money and time initially, passive income will become easier to rake in
over time.
Most people are familiar with passive income in terms of investing in the stock market, but owning a rental property is another way you can earn it.
Purchasing a Rental Property—Are You in the Right Place?
While there
are different ways to profit in the real estate world, we will cover purchasing
a property and renting it out to tenants.
You should
only purchase a rental property if your financial circumstances allow. We
recommend being debt-free and having an emergency fund built up before
investing in a rental property. Don’t let purchasing a rental property
interfere with other financial goals like saving for retirement.
Settling on the Right Property
Once you
have determined that you are in the proper financial circumstances, you can
begin to look for the right investment property. Check out the following
guidelines when you’re picking out your first rental home.
How Much to Spend
For your first
property, you shouldn’t be eyeing multi-million-dollar homes. Start with
something stable and modest. If possible, pay cash for the first place you want
to rent to tenants. Try to find something priced at around 70% of what it’s
currently worth in the real estate market. You don’t want to pay more than what
the property is worth.
The Type of Property
If you want
to start generating rental income, don’t buy a place that’s in complete
disarray. You want to find something that’s move-in ready. In general, try to
avoid foreclosures, as these can be costly fixer-uppers.
The home
you purchase doesn’t have to be brand new. If you buy your property with the
help of a company like Sterling Woodrow, it will set you up with a management company
that can handle any repairs that arise later down the road.
Location
Select a
local property for which you can regularly conduct check-ins. Buying something
overseas can become complicated, especially if you are new to real estate
investing. Try to find a home that’s:
- Close to
good public schools - In a
neighborhood with well-performing real estate prices - Close to
major highways and public transportation
Start Collecting Rent Money
If your
rental property is in a good area, you’ll likely be able to find responsible
and easy-to-deal with tenants. With tenants living in your rental home, you can
collect rent money while putting in minimal effort.
Some
landlords deal with repairs themselves, while others source out the work to a
management company. Evaluate your experience and other obligations to determine
the best route for you.
While you
want to ensure your home is in good condition, don’t be overbearing. Check in
on your tenants every couple of months and leave the doors of communication
open.
Get Started with Earning Passive Income through Real Estate
Some people
are unaware of how profitable renting out a home can be. While it does take
some research and initiative on your part, renting out a home is a smart
financial move that can produce passive income for years to come. If you have
the financial resources to do so, start looking at the properties available in
your area!
