Investing in real estate really seems like a no-brainer. Not only could it provide a source of income for the rest of your life, that investment can be passed down to your children.
Obviously, in order to start your own business, you need to have a fair amount of money set aside to get you through – especially at the beginning when you aren’t making much money – but there are many other things that you should take into consideration.
Without further ado, here are some tips on how to get that rental business started.
Let’s Talk Finances
Obviously, if you are going to be purchasing real estate to start a rental business (or even an actual apartment or condominium complex), you will need some capital.
There are several different ways in which you can pull together the money you need. One method is to leverage your own house by using your home’s equity as a down payment on whatever you are purchasing. Or, if you are planning on actually living in this new property, you can rent out your current home. The first option is a little more likely for those looking to start a business, so we will stick with that one. Applying for a home equity loan is a good place to start, as it will probably be easier to snatch one of those than it will be to get approved for an investment property loan.
That said, sometimes banks aren’t exactly the easiest establishments to get loans from. Thankfully, there are other establishments out there that can help. We recommend looking into hard money loans, as often times they are much quicker to obtain, making it easier to get started on your path to being a rental business owner. Opt for lenders in your immediate area. For example, if you’re looking to start that business in Central California, check out Bakersfield hard money loans. If you’re living in Scottsdale, check out an Arizona-based hard money lending company.
Let’s Talk Makeovers and Upkeep
Are you looking to buy a brand new structure for premium bucks or something that needs some serious rehabilitation for a lower price point? No clue? Go for the second option. Though paying more up front for a brand new home might seem like a good idea because you (hopefully) won’t have to put much money into it before finding a renter, it will probably take a little while to make the money you spent back as revenue. So, unless you have millions in the bank set aside just for this reason, skip option one.
Buying a fixer-upper is a way better option for real estate investors. These homes will have a much lower price point because of the work that needs to go into them. You can save money by doing as much of the maintenance and repairs as you can, and then hire people to help you out with the rest. Once the home is done and rented, you will have to keep up with the maintenance as the home ages and as things break, but by then the money coming in as rent should be able to help with that.
Let’s Talk Rent
In order to make any money, you have to get paying renters. The amount of rent you get will depend on the style of property, its location and who your target renting market is. If you are renting out a home in a college area, your main market is going to be college students and they might not be the most lucrative (not to mention the repairs that might be needed after raging parties after finals are over with). To be on the safe side, it is usually easier to rent out homes to families in urban areas. If it is a dual income household, even better. Of course, there are never any guarantees that your chosen renters are going to be perfect, but you just have to roll the dice and hope you nabbed some good ones that plan on staying for a while.