3 Tips for Investing in Rental Properties This Year

If you are planning to invest in rental properties, now is the best time to do so. As the economy starts the gradual journey towards a full recovery and interest rates remain low, you might want to act quickly while the market remains favorable to investors.

Even if you had already planned on investing in an apartment prior to the pandemic, you need to make sure you are walking down the right path. At this point, the market remains uncertain, so it’s important that you calculate your decisions properly so you can make the most out of the current situation.

Education and knowledge are crucial to your success as an investor, so here are a few things to keep in mind as you scour the market for opportunities.

  1. Start with an investment goal

When coming up with an investment strategy, it’s important that you anchor your decisions on a set of specific goals. This is as basic as it comes, but you could hardly succeed without a list of targets to accomplish. 

Before you dip your fingers as a rental property investor, you need to have your eyes set on either building passive wealth or diversifying your portfolio across different locations and asset classes. 

Never settle for a general goal. You need to have a long-term vision. Once you have your goals straightened out, you won’t have to worry about everything else down the line.

  1. Know your financial sources

Rental properties such as apartments cost a great deal to acquire. We’re not just talking about the money you have saved during college. You will need to find the right loan for financing the acquisition. Conventional loans, home equity loans, and hard money loans are the most common financing options to consider.  

You just have to make sure you qualify for any of these loans so you can pay less out of pocket. If you lack funds in the first place, you can always reach out to friends and family members. Using other people’s money allows you to build an investment pool where the risk is divided among your equity partners. 

  1. Ensure effective property management

Acquiring an investment property is only half the battle. To make sure it generates positive cash flow, you need to handle repairs, attract renters, and include value-add components. Amenities such as a co-working space, a fitness center, and pet-friendly areas are just some of the best features to add to your property. 

When it comes down to maintaining profitability, make sure to come up with a rental rate that will entice more tenants without putting a strain on the bottom line. For this, consider using a rent estimate tool to determine the best possible rate to offer. Be sure to track your net operating income as well to see if your cash flow is healthy. That way, you can cut down on unnecessary expenses. 

If it’s your first time purchasing a rental property, it pays to be well-equipped with the proper knowledge. To be sure, you may want a mentor to help you navigate the market.