Renting a property usually isn’t what grabs the attention of would-be investors especially when compared to the alluring ’quick cash’ of a fix and flip. But, by keeping in mind several key investment principles and using a few savvy financing moves, a quality rental portfolio can not only make you cash in the short term it can also build true wealth in the long term. The truth is – investments that rely more on income return tend to be less volatile than those that rely more on capital value. In fact, over the 30 year period from 1977 to 2007, close to 80% of total U.S. Real Estate return was derived from income flows!
How to build a rental empire
The first step to building a rental empire is knowing how to spot a great rental deal when you see one: a house priced way below its market value, or maybe just a property that needs a few slight upgrades to shine.
Here are a few other important factors to pay attention to:
- attractive neighborhoods
- cash flow
- capitlization rate
A great calculator to understand your properties cashflow https://www.calculator.net/rental-property-calculator.html
After taking these factors into account along with the concept of leverage you are ready to buy your first property. Purchasing your first property is what many find as the most difficult – financing the purchase of a home can be scary to many people but there really are a ton of ohptions: Conventional, Hard-Money lenders, heloc and more. Check out our partners if you need someone to help you figure it out.
Let’s say you picked a great property: you’ve nailed a house in a desirable area and you have held it long enough to appreciate or you’ve fixed it up a considerable amount; if you’ve done everything correctly you should have a decent amount of equity built up in you home either from appreciation, or because of the improvements you made. It’s time for the next step of building your rental property portfolio: Refinance. This will allow you to pull out the equity you’ve got sitting in this property so you can put it towards your next purchase.
It really is that simple- BRRR: Buy, Rent, Rehab, Repeat. If done correctly, almost anyone can build a successful cashflow positive rental portfolio and enjoy passive income!