The short answer is that it can because not only do you have a property, but you have a steady inflow of cash that can be utilized for other investing pursuits. Here is everything you need to know when you are getting into rental real estate. I hope it will help you in the right away. If you learn every aspect and look closely before investing, you will get more benefit out of it. Most think that rental real estate is just buying a property and then open it for rent but there is much more to it than that. Here are a few steps you should consider: Step #1 – Choosing Your Property Type There are many kinds of rental properties that you can start investing in. You can choose to invest in single family homes, multi-family units, shopping centers, storage units, office buildings, and whatnot. All of these categories have varying prices and opportunities, it’s your job to choose one, depending upon the size of the investment you want to make. Let me give you a breakdown. Residential Properties Single Family Units Multi-Family Units Apartments Commercial Properties Shopping Centers Office Buildings Storage Units Besides these self-managed options, there is also the option to invest through different investment funds. These funds are a wonderful way for small-time investors to get started in real estate investing and make their way from there. Step # 2 – Choosing Between Local or Long-Distance Properties The second step you have to take care of before you get into buying a rental property is to decide whether you want to invest locally or in a long-distance property. What do I mean by this? A local investment would be in a property located in your own market, your own neighborhood, or your own city. But a long-distance investment would mean investing in another market, another city where you see a potential of market value increases over time. Benefits Of Investing In A Local Property Easily manageable Easily rented out Can self-monitor Benefits Of Investing In A Long Distance (a growing market) Higher Rents More cash flow Greater returns Step #3 – Choosing Between Appreciating Properties or Cash Flow Only As an investor who’s focusing on buying rental properties, you need to understand how different markets behave over time. It’s an analysis of the current market value of a property against the predicted market value over a certain amount of time. Let's paint a scenario. There’s a property 1 in Market A which has a market value of $100,000 dollars and its expected value is predicted to increase to $150,000 in 1 year. On the other hand, you have property 2 in Market B which has the same market value but its expected value is predicted to stay the same in a year. Obviously, you’d want to choose property 1, I would too. But, it’s crucial that you keep step #2 in mind when making the decision to invest in other markets. Step #4 – Self Management Or Hiring A Property Manager This is one of those decisions, you’d have to make after you’ve purchased the property. You can choose to manage those properties yourself. However, if you don’t want to be actively involved in managing those day to day tasks, you can always hire a property manager to do the job for you. Still, it’s a decision you have to take care. By managing your properties yourself, you can save up on money and keep a close watch on everything. Only, if you want to get away from all the hassle like interviewing tenants, managing rents, etc. and don’t want everything on your plate, you can hire a property manager just keep in mind that this person you hire is not only going to represent you but your money as well. So until and unless you trust them fully, don’t hire them. Benefits Of Self Management No extra costs Closely monitored properties Full control Benefits Of Hiring A Property Manager No hassle No rushing to emergencies No extra work Step #5 – Keeping Demographics In Mind Quite frankly, this is one of the most important aspects to consider with your investment property. My friend, you have to make sure that all your demographics match up so that you can be successful as a rental property investor. Let me explain further. A property located in an area that doesn’t have any good schools is never going to appeal to a family with kids. Get it? All your demographics should match up to the rent you’re proposing for your property. If it doesn’t, you’ll definitely have a hard time finding a tenant Step #6 – Choosing To Finance or Cash A single question you need to ask yourself when buying a rental property is whether you want to pay cash or finance? If you know the answer, your job will be a lot easier. My recommendation is a fixed-rate 30-year mortgage. Step #7 – Choosing The Location wisely Remember my friend, a great rental property would be one that doesn’t give you any trouble. It attracts tenants and is located in a great area so they pay their monthly dues on time. What categorizes a great property? I have managed to put together a list of different properties that are great to rent and would certainly be a smart investment. Located Around Schools: The most common tenants are usually young families with kids. So a property located near good schools would attract more families and it will be easier to rent them out. Good Neighborhood: There are people that look for houses in great neighborhoods because that overall environment is important to them. These people would even sacrifice living in a not so great house to live in a good neighborhood. Smaller Houses: One thing you need to understand is that smaller houses are easier to rent out in comparison to larger ones. So think smartly, when buying a rental property. Houses With Not Too Many Upgrades: I get it, accessories are great but they don’t get you any extra rent, do they? So when making an investment, look for a clean and nice one, after all, that’s what people need, not what they want. Step #8 – Keeping A Budget For Maintenance One mistake that I’ve seen many investors make is to not do the math properly. It’s easy to get distracted by all the money coming in. It’s easy to lose track and not keeping a maintenance budget in mind. Don’t ever do that! No matter how good your property is, there are always going to be some maintenance charges if not many. Always keep the worse in mind when planning these things out. Step #9 – Invest In A Property That Has Positive Cash Flow Whenever you’re buying an investment property no matter rental or any other, always invest in properties that generate positive cash flow. You have to analyze all your options and invest in a property that will make you money. Step 10 - Always Have An Exit Strategy You might have heard of having an exit strategy for your real estate investments. Substantially, buying a rental property is not any different. When you buy a property, ask yourself, what’s your goal? What do you want from this property? And, for how long do you want to keep it? It’s always good to plan ahead. Think about your exit strategy and how you’re going to handle it.