When you want to maximize your investments and have a strong portfolio, most experts agree you should diversify your investments rather than putting all of your money into one type of investment. It’s also a good idea to diversify your income. One way you can accomplish this is through investing in rental property. But there are 4 different ways to invest in rental property you could choose from to get started.
1 Single Family Rentals Nearby
You could purchase a rental home and become a landlord by buying a rental property near where you live. Keep in mind before you sign the dotted line there are many responsibilities when you are a landlord other than just signing a contract or two and then collecting the rent each month. Some of those include maintenance and repairs, dealing with angry tenants, evicting tenants that don’t pay, and other not so fun management issues.
2 Single Family Rentals in Other Cities
Investing in a single family rental in another city is another way you could invest in rental property. You could do the research yourself and find a property to buy in the location of your choice, but there are also ways to invest in properties in locations different from where you live without having to do that work yourself. Owning a turnkey operation in a different part of the country used to be unheard of, but it’s gaining in popularity. In addition, there are management companies that will offer help managing the property so you don’t have to worry about all the day to day landlord hassles. This way, you can remain an investor, not a property manager.
3 Multi-Unit Rentals
Another way to invest in rental property is through a multiunit property. A first-time buyer can go through FHA and get a loan with a down-payment of only 3.5% instead of the usual 20% normally required on a property with up to four units, provided you live in one of the units for a while. If the purchase price is $120,000, for example, a down-payment of 3.5% would be only $4,200. A traditional bank loan with a 20% down-payment would have been around $24,000 instead. That’s a big difference for a first-time buyer and it could be exactly the help you need to get started investing in real estate.
4 Partnership Investing
Another way to start investing in rentals is to investing with a partner you trust when you don’t have a lot of money to get started investing in real estate. Together you could come up with enough money to generate the down-payment required to purchase your first commercial or residential rental property. Keep in mind, management decisions of a partnership are shared, which can be good or bad depending on the situation. Also, if your partner decides they want out in the future, it could force you to sell if you can’t afford to buy them out.
These are just a few of the different ways to invest in rental property you could choose from.
How would you choose to invest in rental property?
Kayla is a personal finance blogger in her mid-20s who loves to write about money topics of all kinds.
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My parents have been considering getting into real estate investing. So, I liked what you said about thinking about getting multi-unit rentals. That does seem like a good thing for a first timer to do. Especially if they got multiple units in a college town.
Yes , my father is also looking to invest in real estate . Hope fully it’s good decision to become an effective investor in features.
I like your suggestion to hire a property management company to manage the day to day hassles. My husband and I have been looking at investing in a house to turn into an airbnb. We might benefit from hiring a management company to handle all of that for us.
Thanks for giving me the idea to find an investment partner that I can work with if my savings aren’t enough to purchase a property. It reminded me of my brother, who mentioned the other day that he wants to invest in real estate. I’ll try to talk to him first and consult him about finding an agent who can help us find single-family homes that we can start with.
I think getting aligned with a reliable partner is a great way to start with the first investment into the rental property, if that partner is willing to do all the hard lifting and you can observe them and learn more about managing the property and the tenants. Otherwise entering into the rental property investing can be done through real estate investment trust(REIT), where you can even start with a very small amount and you bear no responsibility to manage the property or tenants and you get your share of the profits every month.
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