How to grow your passive income stream with rental properties
By Derek Dawson, Founder and CEO of Dawson Property Management
Real estate renting is considered one of the most lucrative ventures with a potential to earn great returns as long as everything is done correctly. Renting out your property will earn good passive income as long as you follow simple but effective guidelines to ensure your income is not compromised.
Let’s closely examine these helpful tips to enable you grow and sustain your passive income.
Downtown Durham captured by Gerald Alston @g_thaking on Instagram
1. Hire a Professional Management Company
One of the best ways to grow your rental passive income is to hire a professional property management company to look after your property. Having trusted professionals run your property ensures the property will be in a good condition and the right marketing strategies will be used to advertise your rental property. A trusted rental property manager will make sure any repairs are done in good time and by reputable contractors. In addition, they will handle all administrative tasks such as collecting rent on your behalf, handling compliance issues and remitting your rental income.
When choosing a company, conduct background research and check their client portfolio to determine what kind of properties they are managing. With professionals managing your property, you can be assured of getting your monthly checks as your tenants assist you to build your equity.
2. Out-of-State Investing
The best thing about real estate is you can have rental properties in different parts of the country versus limiting yourself to your city or state. As long as you entrust your property to professionals, you have the ability to invest in the rental property market in any part of the country. This diversity allows you to choose areas where you can invest for lower amounts and enjoy great tax incentives. The best places to put up rental properties are areas with high per-capita incomes, high-occupancy rental opportunities, low unemployment rates, and vibrant local economies. You don't want to invest in a location whose rental property market is dull and your units will remain empty which denies you income. When carefully executed, out-of-state investing significantly increases your potential for passive rental income.
3. Choose Your Rental Property Investments Wisely
Successfully generating passive income from your rental property business entails doing a lot of research to avoid making investment mistakes that can be costly. You cannot afford to make bad decisions as any mistake can cost you your entire investment. Before purchasing a property that you intend to rent out, ensure that you physically visit the property, do an analysis of the local market to determine whether it’s suitable for long-term rental income, check the condition of the property and review a property's tax history. Seek help from a reputable and experienced professional to help you put your money in a turnkey investment properties that minimize risk and maximize on income.
4. Have a Strategy
Passive income requires a lot of planning and making strategic decisions in order to remain competitive. Before investing in a property, you should always have a clear-cut plan that will ensure you recover your entire initial investment as well as enjoy a steady rental income for a long period of time.
5. Cash Flow
Properties differ when it comes to cash flow. A high return investment comes with higher risks as the stakes are high. You have to keep on your toes to ensure everything works out well. On the other hand, a rental property in a lush neighborhood with good public amenities and security has lesser risks and is likely to offer you a more stable income even though the profits might be less compared to high-risk areas.
Durham’s Trinity Park by Kharmika Alston @LiveLoveDurham_ on Instagram
6. Caliber of Tenants
As a rental property owner your goal is to find good and responsible tenants. Properties in upmarket and stable neighborhoods tend to attract reliable tenants who understand their responsibilities and who will pay their rent without fail. Properties in lower income areas can at times have delinquent tenants who will violate the lease that is, fail to pay rent on time, damage your property or even move out without notifying you. This means, you're left with expenses such as repairs that you need to deal with and leads to lowering your rental income. A property with good passive income should have the right tenants and those willing to commit long-term.
7. Frequency of Vacant Units
A sound rental property investment must be in a good area that allows your investment to expand over time. So long your property is in a good area and left to professionals for management, you will attract responsible tenants that will stay for a long time.
8. Property Should be in Good Condition
Before you purchase, get an independent and professional home inspector to make sure you're putting your money into the appropriate real estate investment. Don't be tricked into buying recently painted and renovated houses without first inspecting key areas such as plumbing, the condition of the roof, HVAC and wiring to determine the condition. A professional will be able to determine the genuine state of a house before you purchase it for purposes of earning rental income.
With the above measures, you can be assured your passive rental income will keep flowing without fail.