"The most common way to create income from properties"
WHAT IS IT?
Rental properties are houses bought by an investor which makes the investor a landlord. The house is rented out by tenants. The tenants pay a lease or another rental agreement towards the landlord.
IF I AM THE INVESTOR, WHAT CAN I EXPECT?
If you are going to buy a property to rent out there are multiple things to take into account. It is important to understand that having a rental property is more of a long-term investment due to the fact that it does not create an instant cash flow. There are different kind of expenses with this kind of investment.
First of all, buying the property which is the main expense of the investment. Also, the potential homeowner’s association dues, property insurances and property taxes what you as an investor should consider buying a property.
One of the riskiest expenses specifically for rental properties are the vacancy expenses. It is known that the vacancy rate is 5-8%, meaning that this amount of the year the rental property could sit empty. Which means that, you as the property owner, need to pay the bills for the property.
Last but definitely not least the costs of spending your own time to the property. Being the owner of the property means you have to spend quite some time in organizing, planning, renovating, finding tenants etc. Therefore, it is very important to consider this in your expenses.
However, there are some good plusses to investing in rental properties. First of all, the rental income which creates the profit. Also, if you bought a property that is appreciating over time, you have the possibility to sell it with profit.
There are certain pros and cons to this way of investing. By investing in rental properties, it can result in regular income and properties can appreciate. Also, there are tax-deductible expenses and you will maximize your capital through leverage. However, working with tenants can be tricky. It can also happen that you will reduce your income due to vacancies.