Understanding Rental Properties as a Real Estate Investor
As home values rise, many people are turning to the rental market. Rental properties are more profitable than ever, but they also involve a steep commitment from buyers. It is important to consider the pros and cons before making a purchase.
Determining Your Involvement
Depending on your commitment level, investing in a property or owning a rental can feel like having another part-time or full-time job. Before purchasing a property, determine your investment style and if you want to be a hands-on landlord or leave the work to someone else.
TYPES OF INVESTORS: WHICH ONE ARE YOU?
Involved investors may be well-suited for overseeing short-term rental units that require steady upkeep. Passive investors may decide to invest in REITs or even rid themselves of the hassle by paying for the services of a property manager. Knowing what type of investor you are can help determine what real estate strategy suits you best.
- The Involved Investor. Involved investors may not mind short-term rentals and wholesale properties that require a high level of energy and commitment. Such properties can be profitable but demanding.
- The Passive Investor. The passive investor is hands-off and may opt to pay for the services of a property manager or invest in real estate investment trusts (REITs). By investing in REITs, you earn income from a company that owns and operates real estate.
- The Inquisitive Investor. Young professionals may be juggling the demands of a full-time job or family. One way to entry: renting out an extra room at home or turning a garage into an additional apartment.
- The Full-Time Investor. Full-time investors may spend a significant amount of time choosing houses and fixing them up just enough to sell or rent for the highest reasonable price.
There are many sound reasons to choose either residential or commercial real estate. If residential, the choices are broad. Where should the investment property, or properties, be located? What type of investment properties should be chosen? Options, driven by strategy and goals, include luxury condos, lower-priced condos, townhomes, single family homes, and multi-family homes such as a duplex, triplex or quadplex.