If you're tired of the modest returns you get on bonds, the insulting rate of interest paid by banks, and the frenetic fits of the stock market, you might think about relying on rental homes to supplement your retirement income. However it's not for everyone. Walk through these six tips to see if real estate investing can help you create a sound retirement portfolio. If the idea still seems solid, the next step is to do your homework.
1. Evaluate your goals. The days of buying properties and flipping them for a quick profit are slowly coming to an end. Rental property can supply a steady, long-term income, however it takes work. Are you prepared to do extensive research to determine a property in a great area that will be attractive to people in the rental market? Are you ready to crunch the numbers to determine if a property can turn into a positive income? Are you able to handle the work, which may consist of repairing the plumbing, cleaning the carpets, and adding a fresh coat of paint for new occupants? If not, you will certainly want to find a good property
management company that will do it for you.
2. Know the community. Certainly, you've heard the old maxim about the 3 essential factors of realty: place, location, and location. If you're purchasing real estate you need to understand exactly what you're entering into. Is there something unique about the property, such as a view or proximity to waterfront or public transportation? What are the zoning laws? Is there a new highway on the drawing boards? You can never cover all the unknowns, but you can discover if the rental market is viable. By acquiring an income property in a good location within the Northern Virginia area, you can improve your odds for property value and demand. You can't accurately predict what the property will be worth in five years, but you should know if you can lease it next month, and at what price.
3. Buy local. There's no neighborhood you're more familiar with than your very own. The farther away you are from your rental home, the more difficult it is to do your task as a landlord. If it's too far, you cannot do it at all. You will have to contract a property manager who will certainly do the job, just keep in mind the costs related to their services.
Click here to view homes for rent and for sale in the Northern Virginia area.
4. Most common option for first time landlords. Most first time landlords opt for a one bedroom apartment. However, most families opt for renting a single family home, close by their children' school. So, when investing in real estate, keep in mind your targeted tenants pool.
5. Buy at a good price. An old rule-of-thumb says if you can buy a property for 12 times the amount of its annual rent, then you're getting a bargain. These days you can do better than that-- maybe nine or 10 times the annual rent. Of course, there are always variations, depending on the kind of property, place, and the prospects for appreciation. But, keep in mind, there's no pressure for you to buy. You don't pay up because you "fall in love" with a place. If you've done your homework, you have a pretty good idea what your monthly rental income will be.
6. Make sure you have some reserve money. If you already have your very own house, you understand that eventually you'll undoubtedly face an unexpected cost-- the dishwasher breaks, the roofing leakages, or the condo association strikes you with an assessment. You need to have cash reserves to take care of any surprises, including the possibility that your unit might be unoccupied for a (hopefully short) period of time. You likewise need to build these irregular expenses into your financial equation to help you decide, in the final analysis, if the entire job is worth it.
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