Guest Author: Natalie Jones from Home Owner Bliss
A simple straightforward starter guide to buying an investment property and generating passive income as long-term rental, short-term rental, or Airbnb.
Buying an investment property is a great way to start generating a passive income stream. You might use the property as a long- or short-term rental or as an Airbnb. The loan product you select will determine not only what you pay your lender, but what you need to charge in rental fees to make the investment work for you. You can set your property apart from others by establishing competitive rates and offering extra niceties for guests. Modern Innkeeper is a wealth of resources designed to help your property stand out from the crowd.
Where to Buy
According to MSN, the location of your first investment property is an important consideration. If you buy a property in close proximity to where you live, you can take care of management issues on your own. If it’s in a different location, you might want to consider utilizing a property management company to screen tenants, collect rent, and handle maintenance issues. Also, give some thought as to how you will use the rental. For example, if you want short-term renters, you might buy in a resort community or in a neighborhood close to a popular tourist attraction. If you buy a multi-family property like a small apartment complex, consider investing in a college town. For long-term rental prospects, look for cities with fast-growing populations.
What to Look For
Ideally, you want an investment property that allows you to generate enough income via rental fees that cover the cost of your mortgage, as well as insurance, property management, and upkeep. You also want a dwelling to be new enough that you aren’t saddled with pricey maintenance issues, and you want to be reasonably certain the property will appreciate in value. The first step is determining what you can afford, and then you can look for loan products that match your needs. Conventional mortgages allow you to choose between an adjustable-rate or fixed rate loan, and if you put down 20 percent or more, you can avoid paying mortgage insurance. A reputable lender can help you explore your options.
How to Outfit Your Rental
If you’re planning to look for long-term renters for your investment property, you probably only need to outfit the space with blinds or window coverings and appliances like a refrigerator, stove, and washer/dryer. If you’re planning to use the property as a short-term rental, you’ll want to furnish it. You can find reasonably priced furniture and décor at discount retail stores, as well as through auctions and estate sales. According to Forbes, neutral colors and durable fabrics are best for furniture, though you can jazz up the space with accessories. If you’re going the Airbnb route, you’ll need to provide dishes, cookware, and utensils, as well as towels and linens. You can add other features like toiletries, coffee and tea, a BBQ grill, and outdoor furniture.
Renting and Maintaining Your Property
Once you’ve purchased a property and have it ready to rent, you can go through a property management company or do the footwork yourself. You can advertise on sites like VRBO, promote the rental in online forums, or even advertise your availability to local companies for corporate needs. Talk to your homeowner’s insurance company to ensure you have appropriate coverage, and hire an attorney to draw up rental agreement contracts to protect yourself from liability. You may also want to use a service to screen prospects, and require deposits to cover the costs of repairing any damage. Consider hiring a cleaning service to make sure the property is in tip-top shape between occupants.
Buying an investment home is a great way to launch a passive income stream. Advanced planning and research will help ensure it’s a worthwhile endeavor that provides you with a good return on your investment. To give your rental property a leg up on the competition, consider the wealth of products and advice available from Modern Innkeeper.