Owning rental properties can be an excellent way to make a living, and some even view it as a convenient way to start their own business. Some buy homes, others buy apartment buildings. A few even buy commercial properties to rent to business owners.
No matter what you choose, there are a few questions you want to ask when buying your first property. These may include:
- Are you going to do the upkeep work or hire someone? Rental properties need maintenance and upkeep. You can clearly hire people to do this, but then you have to factor that cost into your earnings and losses.
- What location do you want to target? It depends on your goals. If you’re looking to rent a house to college students whose parents are paying, the optimal area may be much different than if you want to provide affordable housing for low-income families, for instance.
- What are your margins going to look like? You need to consider things like the cost of paying off the loan and making repairs, and then you can compare those costs to the monthly rental income.
- Do you want a fixer-upper or a move-in-ready space? You may get a much better deal on a fixer-upper — buying with cash instead of a loan, for instance — but that means you have a lot of work before you can even rent the space. How does that impact your income and your plan for the future?
These are not all of the questions you should ask, but they will help you get started as you consider the pros and cons of this transaction. Be sure you are also well aware of the legal steps you need to take to get your new business idea off the ground.