Rental properties are a source of passive income and are an effective long-term wealth building strategy. With the potential for the value of a property to increase exponentially, real estate investment is a proactive means to generate sufficient capital. Nate Armstrong – The Investor Relations Chair for Home Invest, claims there is a multitude of steps individuals can take to optimize their annual return. He states it is imperative that individuals be aware of both their initial costs and monthly earnings when determining the overall profitability of their investment. Ultimately, taking the time to perform extensive research will help ensure a steady passive income. Nate recommends the following tips for individuals wanting to earn income through rental properties:
Location plays a vital role when determining property valuations. This is due to the fact that highly populated areas are more likely to generate a significant rental yield. Locations proximal to local colleges or universities are often in high demand due to the number of students seeking housing arrangements. Similarly, ensuring maximum accessibility to amenities such as shopping centers and local transportation services will decrease the chance of prolonged vacancy. Nate Armstrong claims that renting out rooms as opposed to accepting individuals looking to occupy an entire house is also an easy way to maximize profits.
Make A Larger Down Payment
According to Nate Armstrong of Home Invest, paying a significant amount of the property’s value upfront will ensure a lower interest rate. He claims that individuals can avoid further costs by putting down at least 20% of the mortgage and striving to make 13 annual payments as opposed to 12, establishing a high rate of return and positive cash flow. Similarly, performing an in-depth financial analysis ahead of time will also give potential buyers further insight into their investment.
Minimize Renovation Expenses
Although a property may require renovations, it is imperative that investors keep expenses to a minimum. Especially if they wish to generate a long-term passive income. Although repairs may be lucrative, performing unnecessary renovations may have negative financial consequences. Turnkey properties are fully renovated buildings that investors may purchase from investment companies. They are also a viable option for individuals who do not want to handle maintenance issues. Likewise, buyers should have a clear plan on how they will manage their property. This is because sources of passive income often require minimal effort to create cash flow.
Implement a Screening Process
A rental application process is essential to ensuring one’s property remains protected. Taking the time to check a potential tenant’s credit report will provide details of their financial situation. It also checks for whether or not they can afford the monthly payments. Similarly, creating objective screening criteria may also prevent damage to the rental property and reduce financial liabilities.
Plan Ahead – Nate Armstrong Home Invest
Nate Armstrong has helped thousands of individuals navigate the real-estate market by developing individual investment strategies. With extensive professional experience, he helps his clients determine what properties will enable them to meet their long-term financial objectives.