How to Make Money Investing in Real Estate
Owning and renting out property is a great way to generate additional income without a lot of effort. You make money by simply being the owner of the property.
You can make money from real estate properties two different ways: appreciated value of the property over time and cash flow from rental income.
- Appreciated Value. While the real estate market has ups and downs, most properties increase in value over the over the long term. On average, properties increase in value at a rate of 3-8% per year, which is called appreciation. Two key factors that affect appreciation are location and the condition of the property.
- Rental Income. Generating income is the primary reason why investors purchase a property. Even if the profit is small at first, someone else is paying down the mortgage and increasing your equity (difference in what you owe vs what it’s worth) in the property.
Most of the rental property in the US is managed by the property owner directly, however there are property management companies that can handle this for a fee (normally around 10% of the rent). They screen the tenants, enforce the rules, and help arrange contractors if something needs to be repaired.
Whether you manage the property yourself of hire someone else to manage it, you need to be prepared to pay for maintenance and repairs that may arise and it’s always smart to have a fund to cover a couple months payments in a pinch.
Keep in mind, that dealing with renters can be frustrating and time-consuming so be sure to do your homework before you allow someone to rent your property. You are trusting them to keep it in good condition for you after all. And, always be sure to have a written lease which will help you in case you ever have issues.
Your eHomeoffer agent can give you more guidance.
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