Investing in real estate can be a fantastic way to make money. There are a few ways to earn from real estate. You can buy and sell properties, perhaps doing some work on them to raise the value before you sell them.
But the most common way to make money from real estate is by renting property to other people. Being a landlord isn’t as simple as you might think, however, especially if you have a few properties to manage.
Do Your Research
Before you even put money into a property, it’s best to be well informed. Real estate is a relatively stable investment field, but it still involves putting a lot of money into something. So, read up about how best to invest in real estate.
This knowledge will help you decide whether or not real estate is the right investment option for you. If you don’t have a lot of funds, it might be worth starting out with fractional investments that allow you to buy a portion of a property.
You can learn from other people’s experience and be well informed of the benefits and pitfalls of real estate investing. This way, if you do decide to invest in property, you can make the most profit possible while still being a trustworthy landlord.
Commercial or Residential Real Estate
The kind of property you own will massively influence how much you make from your investment and how much work you will have to put in.
First, you should choose between commercial or residential properties. Each option has different opportunities and risks. If you have a commercial property in a great location, you can charge higher rent and you can be assured that you will always have a tenant. However, while you want to make more money, beware of charging too much rent.
The tenant still needs to be able to make a profit from their business. If the rent is too high, they will have to move elsewhere. Over time, you might find that your commercial property is unrentable, even if it’s in a great location. Balance is key.
Residential real estate has some of the same principles. A balanced rent is the best way forward, as you make money without driving out tenants.
Different types of property might also have different needs. For example, a commercial property might need specific insurance or certifications depending on what business operates. You should also think about how to handle utility bills, especially if you rent to a business that uses a lot of water or power.
Choosing the Right Property
It’s also important to choose the right property for your budget and your needs. Sometimes the cheapest property isn’t the best property. When you rent to a tenant, your property has to be habitable and meet some basic standards. Not every building on the market reaches these standards.
A cheap property that needs a lot of work to be habitable might end up being a money pit more than anything else. You can’t make any money from the property until it’s rented out.
However, you can find some properties that just need a bit of work. This is cheaper than getting a place that someone can just move into right away because you might be able to boost the value with just some simple decorative changes.
If possible, get a surveyor to make sure the property doesn’t have any potentially expensive issues.
Find the balance between the amount of money you will save, the amount of money it will cost to renovate a property, and the amount of time and effort you’re willing to put into the project.
Also, bear in mind that location and other factors will impact the amount you can charge for rent. Look into other properties in the area that are similar so you can work out a fair rent that will attract tenants.
Maintaining the Property
As a landlord, it’s your responsibility to maintain the property. As said earlier, the property has to be at least habitable for tenants to rent from you.
Basic habitability means that the property is in good structural condition. It needs to have heating, electricity, and hot water. It also needs to be free of pest or mold infestations. The property might also need safety features like smoke detectors and locks.
There are a few ways to go about this. First, it’s a good idea to check on the property now and then to make sure things are working properly. This isn’t just good for your tenants, but it’s also good for you. After all, the building is owned by you, and any issues can build up and cause more damage.
You must give the tenants notice before you inspect the property. They are renting the space and you don’t have the right to simply walk in when you please. Depending on the local laws and regulations, it’s required to give at least 24 to 48 hours notice before entering the property. It’s good manners to give more notice if possible. Of course, in an emergency, you can enter without notice.
Another good way to make sure the property is safe and in good condition is to allow the tenants to contact you if they notice an issue. After all, they are the ones living there.
If you ignore issues and the property becomes unlivable, the tenants have every right to stop paying rent. You might also face legal consequences, especially if someone is injured due to neglect.
Managing the Tenants
One of the hardest things to deal with in any business is the other people. First, it’s a good idea to be selective with the people you allow to rent your property. Try to meet them and ask about past experiences renting or owning property.
You are allowed to have certain preferences and rules as a landlord. For example, you might not want someone with pets in your property due to potential damages and infestations. You also have a responsibility to your neighbors, so try to find someone who is likely to pay rent on time without causing issues.
You should also consider the type of lease you want. Short leases can be riskier, but you can earn more money. Services like AirBnB allow you to rent out a property for a few days or weeks at a time.
One important part of the tenant-landlord relationship is the deposit. The deposit is a guarantee that the tenant won’t damage the property being normal wear and tear. It’s not free money that you get for the privilege of being a landlord.
It’s a good idea for both the landlord and the tenant to video the property before they start renting and after they leave. This way, it’s easier to compare damages and other issues, so you can work out how much (if any) of the safety deposit you’re entitled to.
Always check your rights and responsibilities as a landlord before renting. Tenants also have certain rights and it’s a good idea to make sure you know what you need to do and what you’re entitled to from your tenant.
Ideally, it’s best to have a fair and cordial relationship with your tenants. For example, if you have a tenant who always pays their rent on time, but they run into issues one month and have to pay a few days late, think about the benefits of pushing them for this. If it’s a one-time problem, it’s best to let it go and hopefully keep a good tenant around.
Evicting tenants isn’t as easy as you might think. You often need to provide a fair amount of notice, depending on the lease agreement. You can’t just kick them out without warning.
Managing Multiple Properties
If managing one property is complicated enough, managing more properties can get even more difficult. Thankfully, there are a few ways around this.
The simplest way to manage multiple properties is to buy a few apartments or a large house that can be converted into multiple units. This means you can rent to more people. In this situation, it’s a good idea to make sure the property is safe and convenient for multiple residents.
One way to do this is by installing an intercom conversion system that allows you and other visitors or tenants to easily and safely communicate with each other. People will feel more safe if they have to give permission for someone to enter the property.
If you rent multiple apartments or houses, another way to make things easier is to hire a property manager. Essentially, you outsource the hard work of being a landlord to someone else, allowing you to focus on other things.
A property manager will take a portion of your profits, but this allows you to have a genuinely passive income. Of course, you might still have to take on some responsibilities as a landlord, but managing multiple properties becomes much more reasonable with help.
