Investing in Rental Properties for Beginners

Posted on March 8, 2010, 5:01 pm, by admin, under Real Estate Investing.

A brief word about investing in rental properties

Although it is easy to understand rental property factors from a tenant’s perspective, it’s a totally different story when you are considering investing in this type of real estate. Where many investors are concerned, investing in any type of property has always been viewed as a viable long-term investment as well as being a great avenue for diversification of your investment portfolio.

In the 26-year period, real estate investments realized an average annual return of nearly 9%. Additionally, during that time frame, commercial real estate investments realized a return of 9.5%. Despite the fact that average annual returns with the stock market were over 13% during that same period of time, annual returns on real estate have remained steady over the course of time.

How to invest in rental properties

The following is a list of helpful suggestions to follow if you are a beginner at investing in rental properties:

Consider the type of rental property that you want to invest in – there are several types of rental properties to research. These include:

commercial properties
multi-family dwellings
single-family units
vacation homes

Investigate your local area first – it’s always advisable to stay close to home whenever you are investing in rental properties since they are more easily managed.

Compare prices – research what current market trends are doing and compare the pricing on similar properties by contacting real estate agents in your local area.

Estimate what the potential annual income will be – this is the step to take after performing the prior one as it will give you an idea as to what your annual return on that rental property will be.

Determine potential losses when considering cash flow – expenses that you’ll want to consider include:

cost of repairs
insurance payments
maintenance fees
your monthly mortgage payment

Speak to an attorney or your tax person – investing in rental properties does carry certain legal and tax consequences that you need to be aware of.

Have your attorney or real estate agent review your agreement and/or contract – make sure this is done prior to submitting a bid or offer on the rental property.

Once you have taken the pricing on similar properties into consideration, submit your offer – make sure that you compare those prices a couple of additional times.

Figure out if you want a property manager – remember that this adds to your monthly expenses so you will want to decide whether or not you want to tackle this responsibility by yourself or hire a qualified individual to do the managing for you.

Attending Real Estate Investing Seminars

As you probably realized, investing in real estate is not a walk in the park, far from it. Actually, if you’re planning to be part of the select group of people making money in real estate, you have to understand that the amount of success and profits is directly proportional to the amount of knowledge you have. Now let’s be clear: said knowledge will not guarantee your success, but it will go a long ways towards increasing your chances at being successful.

Don’t assume that real estate is one of those ventures where you can learn “on the job”. There are big sums of money in play, and you don’t want to put that in jeopardy. Attending a real estate seminar can help you learn critical information on investments and related issues. Another aspect that’s often understimated is the opportunity to network with fellow investors in your area. They have the experience and developing business relationships with them can turn out to be extremely profitable.

When it comes to choosing the right real estate investing seminar to hone your skills, you should stay away from those two extremes: too expensive and too cheap. As one website put it best, “Expensive seminars may not deliver the quality they promise. Free seminars may be sales pitches in disguise.”

Your sweet spot will be real estate investing seminars that are reasonably priced, but not overly expensive. The money you spend should get you in a class that’s not too large, so you can still get some level of individual attention; your speaker will more likely be more of an expert on the topic, and with a reputable company, you’ll most likely be covered by a refund policy. These are the main things you need to find in a good real estate investing seminar.