Real Estate Rentals: A Passive Investment Technique
Real estate can be a great way to make a turn-key investment in
property, but you need to go in with your eyes open. Otherwise,
you could end up losing your nest egg.
To invest in real estate, you need to have a rainy day fund.
Things happen - you're the landlord now, and you'll have to pay
if something goes wrong. If you need to fix the walls, the
plumbing, or pay for flea
control, you'll want to have some money set aside. If you're
handy, you can cut these costs down, but you can't eliminate
them entirely.
You also need to make sure you're not paying too much. Don't buy
in a super-expensive area - go for something in an "up and
coming" place where you can get a good deal and watch property
values rise in the future. If you get locked into a real estate
bubble, you may not make your investment back. You need a place
where your rental income will cover the mortgage with a cushion
for emergencies.
Also, make sure to trust the company that is handling the
property for you. Property management can be a great deal - it
saves you from all of the hassle. But don't just go with any
random, fly by night company. Call reputable realtors and ask
their opinion about companies in your area. They can probably
give you a good referral, and it'll be worth your time if you
can find someone who will manage it well - after all, you're
dependant on them to make sure your property is filled with
tenants.