How to Start Investing in Rental Properties

Though many people have realized that the dramatic increases that had been observed in property values have come crashing down over the last several years, investing in real estate is still a great idea and will pay off handsomely as the country crawls out of recession and back into a more profitable market. The main reason for this is that property values are near the lows that people have seen in their lifetime and that means that the values will have to go up. These are some tips that will help individuals that are interested in beginning to invest in real estate to make the most of their initial investment.

First, individuals that are interested in starting to invest in rental properties should target an area that they would like to own property in. Surveying neighborhoods to learn the general makeup of neighborhoods that investors might be interested in. Some important qualities to keep in mind are the ratio of owner occupied homes to rental properties, the general upkeep of homes in the area, and the demographics of neighborhood inhabitants. Once a neighborhood has been targeted as a good potential fit for investment, investors can then begin looking for properties that fit their individual criteria.

The recent economic crisis in the United States has led to an influx of distressed properties available on the market. These properties could be for sale as a result of foreclosure, owner relocation, divorce and other factors as well. Distressed properties are a great target for investors because they can typically be purchased for far less than the market price of similar properties (this does still hold true even in the depressed economy). Identify properties that fit into your criteria and make bids on those properties. After bids are made, be prepared to wait for the entities selling the home to decide which bid is going to be accepted.

During the period of waiting to learn if offers on properties have been accepted, the investor should decide whether they will be managing their properties themselves or hiring a management firm to manage the rental properties. Additional work that should be done during the waiting period includes, deciding on what improvements will be made to the property and also setting rental fees for the property. When determining the rental fees for a property, an investor should make sure that they will be making money on the property instead of losing money.  Rental costs should cover payments on the property, property taxes and insurance. Additionally, an amount of the rental costs should cover repairs that may be needed.

Beginning to invest in rental properties will not be easy at first. However, if an investor has a clear plan for their goals, they will be able to make money by investing in rental properties. It is best to stick with single family homes because it is easier to maintain a single family home. As an individual becomes more adept with operating rental properties, they may wish to branch out into duplexes and other multiple family structures.