A great way of generating passive income – a.k.a. sitting back and waiting for the cashflow – is investing in a property which you would later rent. Nowadays, with all the expats and student exchange programs, people often look for places to rent, and, according to removal services, houses are big on the market. If you are willing to invest in such an endeavour, here are some tips to make the beginning of this adventure a successful one.
• Set a budget. The first and foremost thing you should do is sit down, do number crunching, and figure out what you will be able to work with. Get a loan, if you wish, but be aware that you will need a lot of money. After all, you will need to buy and renovate a house, and houses don’t come cheap. You will also need to maintain the house after the renovations, and still pay its bills until potential tenants come along. Be realistic about what you can and should pay.
• Find the right spot. Now it’s time for some in-depth research. You will need to look for a town or city where people move in all the time – a place with very busy moving and storage companies. If you decide to be picky about tenants, look for a location where the lifestyle consists of the type of tenant you will want in the property you own. But you should be practical about it and have no emotional attachment to the property – even if the tenants are wild students who will party all day and all night, and are bound to break some things, you should not care, as long as they pay rent, replace broken furniture, and don’t damage the property.
Furthermore, you will need to find an appealing place where people will want to live in. A house on the top of a hill is rarely a good idea, but you will achieve something if you buy one in a communicable area, with shops and markets around. If you plan on housing students, get one near universities, and you will get a substantial amount of potential tenants.
• Renovate the house. Inspect the house and all its problems, and fix them. Make the house one that you would live in, and add more things. Make sure everything works, and add decorations – but don’t overdo it. A painting or two will be enough, tenants will take care of their own décor anyway. Just make sure it’s furnished and working, and it’s almost ready for rent.
• Finally, you either need to research the market to set the right price, or get yourself a real estate agent to find it for you. You need to set a rent big enough to start paying back your investment as soon as possible, but small enough to attract the most potential tenants. This is one of the tricky parts, but you should handle it by looking at the house rents in the area.
After all this, you are ready. Just do regular inspections to make sure your investment is still standing, and now you can wait for sound of removal vans to voice your future tenants’ arrival.