I’m 55 and interested in Real estate. Should I focus on rentals or flipping?
This is the question many investors ask….
You are 55 and you want to be at home with your friends and family and spend time with them. You have already done the hard work in your life and now you want to have some time for yourself and your family where you can easily be able to meet all the expenses and live a relaxed life.
My suggestion would be to go for Rental.
If you’re looking for a steady inflow of cash, there is no better way than buying rental property.
Not only that you will earn rental payment but the price of the properties (Right location) will keep rising.
What do you have to do for this?
Buy a property – rent it out and enjoy the steady inflow of money until you choose otherwise.
Many investors around the world use this strategy to generate a steady inflow of cash.
But, is it that easy? Or, does buying rental properties require a strategy?
Well, you might have heard about smart investments, right?
Jog your memory a little, you might have in your real estate license training.
Yes, that’s your two cents of wisdom for buying rental properties.
As long as you’re taking the smart approach, you’ll be well on your way to generating a steady source of income for yourself.
Sure, there will be some speed bumps along the way, but you have to stick to your game plan persistently to be successful.
Don’t Be A Bundle Of Nerves
Come Out OF Your Fears, Already! JUST DO IT!
Let’s clear the air a little bit, everybody makes mistakes, I’ve made quite a few myself.
But, does it stop me? No!!
And, it shouldn’t stop you either.
You can take a precautious approach to invest but don’t let the analysis paralysis keep you down.
Start somewhere, even if it’s a small investment.
As long as your smart strategy is concerned, I will take you through all of the different aspects you should consider when buying rental property.
Step #1 – Choosing Your Property Type
Well, there are many kinds of rental properties that you can start investing in. You can choose to invest in single family homes, multi-family units, shopping centers, storage units, office buildings, and whatnot.
All of these categories have varying prices and opportunities, it’s your job to choose one, depending upon the size of the investment you want to make.
Let me give you a breakdown.
- Single Family Units
- Multi-Family Units
- Shopping Centers
- Office Buildings
- Storage Units
Besides these self-managed options, there is also the option to invest through different investment funds. These funds are a wonderful way for small-time investors to get started in real estate investing and make their way from there.
Step # 2 – Choosing Between Local or Long Distance Properties
The second step you have to take care of before you get into buying a rental property is to decide whether you want to invest locally or in a long distance property.
What do I mean by this?
A local investment would be in a property located in your own market, your own neighborhood, or your own city.
But a long distance investment would mean investing in another market, another city where you see a potential of market value increasing over time.
Still not making sense? Hold on a minute.
Benefits Of Investing In A Local Property
- Easily manageable
- Easily rented out
- Self monitorable
Benefits Of Investing In A Long Distance (a growing market)
- Higher Rents
- More cash flow
- Greater returns
Step #3 – Choosing Between Appreciating Properties or Cash Flow Only
As an investor who’s focusing on buying rental properties, you need to understand how different markets behave over time.
It’s an analysis of the current market value of a property against the predicted market value over a certain amount of time.
Let me paint a scenario for you.
There’s a property 1 in Market A which has a market value of $100,000 dollars and its expected value is predicted to increase to $150, 000 in 1 year.
On the other hand, you have property 2 in Market B which has the same market value but its expected value is predicted to stay the same in a year.
Obviously, you’d want to choose property 1, I would too.
But, it’s crucial that you keep step #2 in mind when making the decision to invest in other markets.
Step #4 – Self Management Or Hiring A Property Manager
This is one of those decisions, you’d have to make after you’ve purchased the property. You can choose to manage those properties yourself.
However, if you don’t want to be actively involved in managing those day to day tasks, you can always hire a property manager to do the job for you.
Still, it’s a decision you have to take care.
By managing your properties yourself, you can save up on money and keep a close watch on everything.
Only, if you want to get away from all the hassle like interviewing tenants, managing rents etc. and don’t want everything on your plate, you can hire a property manager just keep in mind that this person you hire is not only going to represent you but your money as well. So until and unless you trust them fully, don’t hire them.
Benefits Of Self Management
- No extra costs
- Closely monitored properties
- Full control
Benefits Of Hiring A Property Manager
- No hassle
- No rushing to emergencies
- No extra work
Step #5 – Keeping Demographics In Mind
Quite frankly, this is one of the most important aspects to consider with your investment property.
My friend, you have to make sure that all your demographics match up so that you can be successful as a rental property investor.
Did this just go over your head?
Hold on, Let me explain further.
A property located in an area that doesn’t have any good schools is never going to appeal to a family with kids.
All your demographics should match up to the rent you’re proposing for your property. If it doesn’t, you’ll definitely have a hard time find a tenant
Step #6 – Choosing To Finance or Cash
A single question you need to ask yourself when buying a rental property is whether you want to pay cash or finance?
If you know the answer, your job will be a lot easier.
Step #7 – Choosing The Location wisely
Remember my friend, a great rental property would be one that doesn’t give you any trouble. It attracts tenants and is located in a great area so they pay their monthly dues on time.
What categorizes a great property?
I have managed to put together a list of different properties that are great to rent and would certainly be a smart investment.
Located Around Schools: The most common tenants are usually young families with kids. So a property located near good schools would attract more families and it will be easier to rent them out.
Good Neighborhood: There are people that look for houses in great neighborhoods because that overall environment is important to them. These people would even sacrifice living in a not so great house to live in a good neighborhood.
Smaller Houses: One thing you need to understand is that smaller houses are easier to rent out in comparison to larger ones. So think smartly, when buying rental property.
Houses With Not Too Many Upgrades: I get it, accessories are great but they don’t get you any extra rent, do they? So when making an investment, look for a clean and nice one, after all, that’s what people need, not what they want.
Step #8 – Keeping A Budget For Maintenance
One mistake that I’ve seen many investors make is to not do the math properly.
It’s easy to get distracted by all the money coming in. It’s easy to lose track and not keeping a maintenance budget in mind.
Don’t ever do that!
No matter how good your property is, there are always going to be some maintenance charges if not many.
Always keep the worse in mind when planning these things out.
Step #9 – Invest In A Property That Has Positive Cash Flow
Whenever you’re buying an investment property no matter rental or any other, always invest in properties that generate positive cash flow.
You have to analyzeall your options and invest in a property that will make you money.
How it’s done?
Here is a guide that will be very helpful in this scenario
Step 10 # Always Have An Exit Strategy
You might have heard of having an exit strategy for your real estate investments.
Substantially, buying a rental property is not any different.
When you buy a property, ask yourself, what’s your goal? What do you want from this property? And, for how long do you want to keep it? It’s always good to plan ahead. Think about your exit strategy and how you’re going to handle it.
Here is a free guide on Exit strategies for Real Estate investments