A rental property is a property that is leased out by an owner to another individual or entity. Usually when real estate investors think of rental properties they think of houses that are leased out to other occupants. However, a rental property can be any type of property that is put up for rent, including office space, green spaces, parking lots and apartments, to name a few.
Many people view rental properties as a great way to build their real estate investment portfolio. After all, as long as you can keep a paying tenant in the property, then, assuming their rent is adequate, they will essentially pay for the property while you simply manage it. In recent years, rental properties have also become attractive as cash-flow generators. Since people cannot rely on fast increases in equity to generate income on properties, they are, instead, investing in long-term rentals that will generate monthly cash in excess of the amount of money needed to maintain and manage the property. That excess cash is the property’s “cash flow” and generates income for the owner every month.
Of course, owning rental properties is not always easy. As the owner, your tenants will turn to you when they need things repaired, replaced or simply renovated. You need a clear, firm and legally binding rental agreement that states specifically what you are and are not liable for in these instances, and you also need to be familiar with both landlords’ and tenants’ rights in the states where you own rental properties. Many landlords opt to hire a management company to handle their rental properties for them so that they do not have to deal with the “midnight calls” and unruly tenants who may not want to pay rent on time. However, if you plan to rent out your properties and use a management company, be sure to factor the cost of management in when you are determining whether or not a property will generate income for you.
While most landlords do get started with single-family rentals, you should not rule out multi-family housing, or apartment complexes, duplexes and some row-houses as an investment option. Analysts and experts are predicting dramatic climbs in the demand for rental property and in the amount of rent that landlords can expect to charge and get from renters in the coming years. This is one of the best times to invest in rental property in our lifetime, and there are many ways to make this traditionally “long-term” investment pay off in the short term as well.