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Rental property investment 101

Rental property, also known as investment orincome property, refers to properties meant to generate profit from rental income or capital gains. Investing in these properties requires understanding the types of rentals, how they generate earnings, and how to choose the right one.

Types of rental property

  • Long-term rental properties
  • These are properties that are rented out for more than a year. Single-family houses and apartments are some common examples.

  • Short-term rental properties
  • Properties rented out for 6 months or less fall under this category. From condos to vacation homes, they can be almost any kind of residential property. Many are listed on websites such as Airbnb and VRBO.

  • Turnkey rental properties
  • Desirable for those just starting, these are long-term rentals bought from companies. Investors who buy these usually depend on professionals to manage the properties for them.

  • Commercial rental properties
  • Commercial rentals are buildings or building units rented out to businesses. Common examples are office buildings, retail buildings, and warehouses.

    Making money with your real estate investment

    There are many ways to earn money with your real estate investment. Three of the most common are:

  • Appreciation
  • The potential to appreciate in value is one aspect of real estate that investors capitalize on. This gives investors the chance to make a profit just by holding on to their property. But since property values and rate of appreciation depend on market conditions, it is advised to research thoroughly before making a move.

  • Cash flowincome
  • This is the money earned from renting out the property. To ensure a good income, you must find a suitable location for your target renters, such as college students in need of an affordable place or businesses who need a sizable office space.

  • Passive rental income
  • If you do not have the time or desire to manage your investment yourself, hire a professional property manager to handle things for you. You can rely on them to do most of the work in marketing your property and handling its day-to-day operations. You can simply sit back and wait for the rental income to come, or focus on your work or other investments.

    Tips for buying the right property

  • Get your financing in order
  • This is the first step in the buying process.To qualify for a loan, you must havegood financial standing as lenders consider rental properties to be higher-risk investments. This means having a credit score of at least 620, although some lenders might accept a score of 600 or lower.

    Your debt-to-income ratio must ideally be 36% or less. You will also need enough cash on hand to afford all the upfront costs like the down payment and legal fees.

  • Choose a good location
  • The key to choosing the right property is location. Properties in areas with a thriving economy, solid job growth, and several real estate options generally make for a profitable investment. Take into account the area’s rental and occupancy rates,as well,since they help determine how much you could earn.

  • Know the laws
  • Landlord-tenant laws affect what you can and cannot do with your property, and they may vary from one location to the next. Some important laws you must familiarize yourself with include those concerning required landlord disclosures, rent rules, and conditions for termination and eviction. 

  • Find a reliable real estate agent
  • Choose an agent who has experience in dealing with investment properties, is knowledgeable about the area, and can handle tough negotiations. They should also keep you up-to-date about your property search, as well as give you proper advice on what actions to take.

Looking to invest in Eden, Utah rentals, condos for rent in Ogden, Utah, or a commercial building in Ogden Valley? You can count on Destination Properties to help you find the right property and help you with the complex buying process.Call us at 801.745.2009 or send us an email at info(at)destinationproperties(dotted)com.