Rental real estate is one of the best ways to build long-term wealth and create steady cash flow for you and your family. However, it does require some calculated decision making and attention to detail. 

 

Here are a few tips to help you get started down this path:

 

  • Find the Right Property. First things first, you need to find a good property to rent out. Look for a place in a nice area that’s growing and has long-term upside. This could be near schools, parks, or shops. A good location makes your property more attractive to renters. The last thing you want to do is buy a cheap house in an area that people are moving out of. You might get a good deal – and you might even find some profitable renters for a year or two – but over the long term, it’s not going to be a good investment.

 

  • Get Your Finances in Order. Before you dive in, make sure your own money matters are sorted out. This means figuring out how much you can spend and how you’ll pay for the property. Some folks save up and pay cash, while others get a mortgage. (In most situations, it makes more sense to leverage the property with a mortgage, which preserves your cash for other investments.

 

  • Understand the Costs. Owning a rental isn’t just about collecting rent. There are other costs, like taxes, insurance, and repairs. Make sure you know the total “holding” costs so you can plan for them. If you’re going into a deal thinking you’ll only be responsible for the mortgage payment, think again. By the time you add on the other monthly costs, as well as maintenance expenses, it can easily erode what you thought was going to be profit.

 

  • Set the Right Rent Price. Setting the rent is a big deal, says SmartAsset. Price it too high, and you might scare off tenants. Too low, and you’re leaving money on the table. Look at what other landlords are charging for similar places in your area. This gives you an idea of what people are willing to pay. Remember, you can always adjust the rent later if you need to.

 

  • Find Good Tenants. Good tenants are key to a happy rental property. They pay rent on time and take care of the place. To find them, you’ll need to advertise your property or, better yet, lean into your personal network to get the word out. Once people apply, check their backgrounds and talk to their previous landlords. This helps you pick tenants who are reliable and easy to work with.

 

  • Consider Hiring Help. If all this sounds like a lot, you can hire a property manager to handle things for you. They can find tenants, collect rent, and deal with repairs. Typically, a property manager is going to take between 8 to 12 percent of your rent in exchange for their services. This isn’t necessarily cheap, but it’s a great trade-off when you don’t want to be consumed with the day-to-day details of keeping your property running smoothly. (As an additional suggestion, always hire a reputable local property manager – not a national company that manages from afar. That means if you’re in, say, Fort Worth, Texas, you’ll want a Fort Worth property management company, such as GreenResidential. If you’re in Chicago, you’d want a Chicago-based company, and so on.)

 

  • Keep Your Tenants Happy. Happy tenants are more likely to stay longer, which means steady income for you. Be a good landlord by fixing things when they break and keeping the property nice. If your tenants have a problem, listen and help out if you can. Good communication and proactive attention to detail go a long way in keeping things smooth.

 

  • Know the Laws. There are laws that cover renting out property. These can be about safety, how much you can raise the rent, and how to handle evictions if things go wrong. It’s super important to know these laws to avoid trouble. You might even want to talk to a lawyer who knows about rental properties to make sure you’re doing everything right.

 

  • Plan for Vacancies. Sometimes, your property might be empty between tenants, warns CIH. This means no rent money coming in for a bit. It’s smart to have a plan for this. Some landlords set aside a little bit of the rent money every month just in case. This way, you’re not caught off guard if your property is empty for a short time.

 

If this is your first time investing in a rental property, take your time and don’t feel rushed. It may be helpful to find a friend or mentor who has done it before and bring them in on your first deal. This will allow you to learn from them while still getting some first-hand exposure to how it all works.