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Buying an income property can be an excellent way to make money and build equity. It will allow you to buy a second (third, forth….) house that pays for its own mortgage and that can even give you some extra money each month. Income properties are an excellent way to make money and can be very profitable over time.
Investing in income properties does not have to be hard, but it is imperative to choose the right properties. It is easy to fail if you do not plant all the way through. If you do not know the market rents, the type of renter you want to attract and how to attract them. You can have the best house in the area, but that will not help you if that is not what people are looking for in that area. If you invest in a budget area then you need to be able to provide budget rentals. You can not offer an upscale apartment in an area that is associated with budget housing. You will not be able to rent it out for a good price. Always invest in a house that suits your clientele, a house that is located in a neighbourhood that your clientele want to live in.
Below we are going to look at some of the things you should think about before buying a rental property.
The price
The first thing you need to consider when you are looking for an income property is the income potential and how much you can pay for the house and still earn a good profit. Overpaying for properties is one of the most common reasons investors fail to make money with income properties. You can read more about how to calculate how much you can pay for a property here.
The location
Location is always critical when you are investing in real estate. You need to invest in properties that you know that you are likely to be able to rent out. You might not be able to afford to invest in properties in premium locations but you must make sure that you only buy properties in areas where there is a demand for rental properties. Only invest in a property that is going to be easy to rent out. That is going to make it easy to make money. Make sure that you know what your intended renter is looking for and that your house can provide that.
Do not put yourself first
A prevalent mistake is to invest in a property that you would like to live in. To renovate the house to the standard you would want if you were to rent the house. This is a big mistake. It can often also be a very costly mistake. Forget what you would want and find out what people renting in that area want. This makes it easier to make good choices. If you focus on your preferences than it is very easy to end up with a house that will be be very hard to rent out in the area where the house is located. At-least at a price that allows you to earn money.
The type of property
Most people who are looking to buy a second house to use as an income property look at residential buildings in their desired area. There is nothing wrong with this put you might loose out on a lot of good opportunities by limiting yourself to residential real estate. There might be other types of properties that allow you to earn a lot of money in the area where you live. Examples of properties that can make excellent income properties include commercial properties and student housing.