Real Estate – Investing in Rental Properties

There are many ways a person can make a living when it comes to real estate investing. Some ways carry more risks than others. It goes without saying that those with the greatest risks are often the very real estate investment methods with the maximum potential profit. In the hot real estate markets of the recent past, flipping houses was often in the news because so many fortunes were been made. Conversely, more than a few house flippers have suffered huge loses in this venture.

Working with rental properties isn’t nearly as glamorous and doesn’t provide the almost instant profits that flipping houses might, but it is also a great and very valid method of real estate investing that will build a steady profit over time if you plan properly. Rental properties are in demand now more than ever with so many people going into foreclosure and losing the homes they’ve worked hard to build for their families. For this reason, rental properties are a great thing to own at the moment, especially those that are family homes.

There are a lot of reasons that people rent and while there are some risks involved with owning rental properties, the risks are much lower than the risks involved in flipping or pre-construction investment endeavors. There are a few things you should consider when purchasing a rental property in order to make a wise and long lasting choice for your real estate investment.

First, only invest in rental properties in areas where people want to live. It may be true that you can buy property cheap in a run down section of town, but it is doubtful that you will change that property into a profitable rental. It is best to pay a little extra for a more attractive address for renters. You will find that your properties are inhabited more often, which will make you more money in the long run.

Second, pay attention to the types of people in the area and buy rentals accordingly. It is quite possible to turn large homes into several smaller apartment units (according to local zoning laws) that are ideal for college students. You do not want to do this however in an area that is more geared towards family homes and won’t be friendly or tolerant of college students. Design the rentals according to the market you are trying to attract.

Third, don’t be greedy. The goal of having rental properties is of course, to make money. At the same time if your price your rentals too high you will find that they sit empty more often than not. Every month that your property is empty is a month that you aren’t making money on that property at best, and a month that you are losing money at worst.

Fourth, be aware of the market. Study the local market for buying real estate and renting real estate. This will help with several things, not the least of which is determining whether or not any given property will make an attractive rental unit. It will also help you figure out how much rent the units you are considering can bring in month after month.

Finally, when renting properties, you need to keep your eye on the long-term goals rather than shortsighted goals. Property rental is a marathon rather than a sprint, with the greatest profits coming at the end. You will want to pay as little interest on the property as possible and pay the property off as quickly as possible in order to realize the maximum profit potential and gain new properties. The real money when renting properties as a real estate investment, isn’t in renting out one or two units, but twenty or thirty. The more rental properties you own, the more money you stand to make from owning them. Copyright 2008 Promotions Unlimited – All rights reserved.

Bob Schwartz, San Diego real estate broker with w/30 years exp. He has a popular San Diego real estate blog Bob’s other sites are: Downtown San Diego real estate & San Diego real estate agents

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James Kobzeff

James Kobzeff has over thirty years experience as a realtor and investment real estate specialist. He is the developer of ProAPOD real estate investment software and freely shares his real estate investing articles.