When it comes to investing, most people see real estate as a relatively safe option. The housing market is not nearly as volatile as the stock market, and investors get to purchase an actual tangible asset rather than a series of numbers on a screen. While it is perfectly possible to make your first million investing in real estate, you will not get there by purchasing a small property and then just sitting back and waiting for the big bucks to roll in. Millionaire real estate investors put time, money and incredible amounts of effort into their property empires, and those wishing to follow in their footsteps should pay close attention to their chosen strategies.
Find The Right House
When searching for a buy-to-let property to invest in, it is vitally important that you find one that tenants will want to rent. Although you may like the idea of living in a remote, rural area, prospective tenants may not like having to commute two hours to work each day. Every month that your property sits vacant ends in a financial loss, so always look for properties that will rent quickly to provide a reliable income. When calculating the amount of rent that you will charge for your property, make sure the total will cover your mortgage, insurance payments, taxes and maintenance costs. Any extra money left over after expenses can be saved towards a down payment on your next property. A property that will increase in value over time is also important as you will need to recoup your investment should you choose to sell. Your local estate agents will have a wide selection of suitable buy-to-let properties such as those featured on this page, and they may even be able to advise you on the best mortgage for your circumstances.
Screen Tenants Thoroughly
The tenants you allow into your properties will have a huge impact on the success or failure of your property investment business. Good tenants will provide you with regular income that pays off the mortgage, keep your property clean and well-maintained, and provide you with tax deductions. Bad tenants can destroy your property, leave you financially out of pocket, and maybe even hit you with a lawsuit if the opportunity arises. Therefore, you will need to be meticulous when it comes to screening prospective tenants to minimize the chance of a bad outcome. Tenant screening services can provide you with a credit report, income verification and a criminal background check along with identification and bank account verification. You should also insist on at least two references from previous landlords as well as a letter of confirmation from the tenant’s place of work.
Be The Best Landlord You Can Be
If you respect you tenants and treat them fairly, they will afford you the same courtesy. Always maintain a professional relationship with your tenants and be sure to respond to any requests or complaints promptly. Being unable to get in touch with a landlord when something breaks down or goes wrong is unpleasant for tenants, and failure to keep your properties well maintained could leave you open to a lawsuit.
Expand Your Empire
One rental property will certainly pay the bills and could even produce a little extra disposable income each month, but it will probably not earn you your first million. Once you start to purchase your second and third properties you will begin expanding your net worth as well start earning a respectable income from combined rents. Purchasing additional properties in relatively close proximity to each other will make it much easier for you to keep track of tasks such as maintenance, advertising for new tenants and showing your property. You will also be able to keep a close eye on your properties to spot any damage or potential problems before they become a major issue. If you are unable to devote a lot of time to managing your various rental properties, then consider using a property management service to keep your properties safe and well maintained.
In order to start making a substantial amount of money from property rental, you will first need to start viewing it as a business. To build a successful business you will need to devote a large portion of your time and even more of your money, but the payoff will eventually be worth it. Real estate is also an excellent way to diversify your portfolio if you are currently involved in other investment projects.
Adam Taylor is part of a property investment team working for private clients. He likes to share his insights on what to look for in a property in order to build an enviable portfolio. Adam writes for a number of property-related websites.