While knowing whether you can afford to invest in property is important, there’s more to it than balancing your budget. Understanding what your options are and how to make the best strategic choice is critical for getting a proper return. This beginner’s guide to investing in property will get you started on the path of expanding your portfolio and raking in extra income.
Types of Rentals
There are three different types of rentals that you can invest in: long-term, short-term, and turnkey rentals.
Long terms rentals come to mind when most people think of investing in property. Typically, these units are rented out for a year minimum and consist of apartments, single-family units, townhomes, or condos.
Short-term rentals are usually condos and get the most business during the travel months, as they are typically rented out for a few days or weeks at a time. Location is important with short-term rentals, as you’ll want to purchase in a high-traffic vacation destination.
Turnkey rentals are also rented out for more extended periods. However, the critical difference is that turnkey rentals are already set up and renovated so that an investor can purchase and rent them out immediately.
How To Start Making Money
With these types of rentals, there are three different ways to generate income.
Tax deductions are the most well-known option, as you can generate tax benefits by owning real estate investments. This is because maintenance and mortgage interest can be deducted from taxable income and can reduce the amount of tax you owe.
While passive income is one of the main reasons people invest in property, it doesn’t mean you’re not active in your own property. It takes a lot of work to manage units. Really, passive income means income you earn automatically.
Appreciation is how property increases in value. For example, how you renovate or refurbish the property may increase its value over time. But regardless of the market, real estate tends to appreciate rather than depreciate.
Choosing a Property
The first step you’ll want to take when choosing a location is to talk to a local real estate agent. They can give you a better evaluation of the market and insider information. Renting is all about location, so observing price trends, vacancy rates, and property demand are essential for choosing units that won’t end up eating a hole in your wallet.
Now that you’ve read this beginner’s guide to investing in property, you’re no longer a beginner!
Ultimately, the best tip you can take is to invest in property that sees a decent amount of traffic and that you have the money to refurbish and invest in it. Talk to a real estate agent or investment lawyer today and start brainstorming strategies to put more money in your pocket.
