The rise and fall of the real estate market in many states does present the risk of whether or not to invest in a real estate property. If you've asked yourself should I buy rental property, you are not alone in the investment community. There are upsides and downsides to all investments that a person can make. By learning how to minimize or in some cases eliminate the risk of loss, you can develop a strong portfolio.
Owning a Rental Property: The Basics
The most obvious element that you need before you buy is a cash source. Real estate is one of the only passive income sources that can be invested into with very little money. The amount that you invest is always under your control. Being an independent property investor can build your wealth if you're careful. Putting together your purchase price investment is just the first part of property ownership.
1. Know How Much Rent to Charge
The purchase price of a rental property is only one half of the amount of money that you need to be concerned about. The lifeblood of all rentals is the rent money that is collected. Setting a price too low could interfere with the monthly and annual return on investment you expect. Some companies use what are known as comps or comparables. This is a review of other company rent prices to help gauge the amount you need to cover you expenses and still profit in a relatively short period of time.
2. Choose a Location Positioned for Growth
A market that is hot today could be cold a year from now. This reality in the real estate industry can be a let down. The choices that you make in the beginning should set the tone of your investment goals. Researching locations that are constantly growing will point you in the right direction. The state of Florida has a rebounding real estate market right now. The market has remained strong year after year due to the common need that people have for adequate housing.
3. Understand Taxation Rates
You can't invest wisely without thinking about quarterly or annual tax payments. Most rental income is not free from IRS, local, state or other government taxes. The purchase price, monthly rent collection and repairs that may need to be made during the ownership of a property should be understood. The taxation that happens to rental properties could change annually based on your personal investment decisions. Getting advice from a real estate tax attorney can save you a lot of money.
Investing in Real Estate Wisely
Putting together your own list of pros and cons is crucial before going head first and investing. There are plenty of other resources here on this website to help answer any questions you have about rental home investing. Making smart decisions to start your investing career can likely pay off. Earning a solid ROI on your investment home is possible and it does take a coordinated team to support you through the process.
