THE CLAIM: Rental property is the is best way to make passive income.
Why Did I Choose this side hustle?
I have discovered for myself that owning rental property can be a great way to generate passive income and build long-term wealth. However, it’s important to understand that it’s not a “get-rich-quick” scheme. Like any other investment, owning rental property requires careful planning, due diligence, and hard work. In this blog, I will outline some key steps you can take to make money owning rental property. Of course, this is from my own experiences and everyone has different thoughts on owning real estate. Things to consider are listed below.
Step 1: Identify the Right Property
The first step in making money owning rental property is to identify the right property. You need to consider several factors before investing in a property, such as location, price, rental demand, and potential return on investment (ROI).
As they say Location….Location….Location. Location is one of the most important factors to consider. You want to invest in a property that’s located in a desirable area, such as a city center, near public transportation, or in a popular neighborhood. This will attract more renters and potentially increase the rental income.
Price is another important consideration. You want to invest in a property that’s affordable and within your budget. It’s also important to consider the potential ROI, which is the expected return on your investment. You can calculate the ROI by dividing the expected annual rental income by the total cost of the property (including the purchase price, closing costs, and any renovation or repair costs).
Step 2: Set Realistic Rental Rates
Setting realistic rental rates is crucial in making money owning rental property. You want to set the rent at a price that’s affordable for tenants, while also generating enough income to cover your expenses and earn a profit.
To determine the appropriate rent, you need to research the local rental market and compare the prices of similar properties in the area. You can also use online rental price calculators to get an idea of the market rent for your property. It’s important to set the rent at a price that’s competitive but also provides a good value for your tenants.
Step 3: Maintain Your Property
Maintaining your property is essential to attracting and retaining tenants, and ultimately making money owning rental property. You need to keep your property clean, safe, and in good condition to ensure that tenants are happy and satisfied with their living environment. I always say I will never be a slumlord and nor should you.
Regular maintenance and repairs can also help prevent costly repairs down the road. You should have a schedule for routine maintenance, such as changing air filters, inspecting the plumbing and electrical systems, and cleaning gutters. You should also respond quickly to tenant requests for repairs or maintenance issues.
Step 4: Screen Your Tenants
Screening your tenants is important to ensure that you have reliable and responsible renters in your property. You want to avoid tenants who have a history of late payments, evictions, or criminal activity. I can’t express this enough. Do your due diligence. Check those tenants out.
Screening tenants can include conducting background checks, verifying income and employment, checking references, and running credit checks. It’s important to follow fair housing laws and treat all applicants equally.
Step 5: Manage Your Finances
Managing your finances is essential to making money owning rental property. You need to keep track of your income and expenses, and make sure that you have enough cash flow to cover your expenses and earn a profit.
You should keep a detailed record of your rental income and expenses, including rent payments, property taxes, insurance, maintenance and repair costs, and any mortgage payments. You should also have a separate bank account for your rental income and expenses, and use a bookkeeping software to help you stay organized.
Step 6: Maximize Your Tax Benefits
Owning rental property also comes with several tax benefits that can help you save money and increase your profit. You can deduct expenses such as property taxes, mortgage interest, maintenance and repair costs, and insurance premiums from your taxable income.
You can also take advantage of depreciation, which allows you to deduct a portion of the cost of your rental property.
In the coming blogs, I will break down my experiences and each step discussed above.
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