Creating Continuous Income through real estate rentals?
I'm very new here but I'm happy to have found this site.
I'm thinking of starting a company very soon that is real-estate driven. I want to get some advice/ consult from somebody who has successfully built monthly income from buying and renting out houses. I'm thinking of starting there (single family houses) and then to commercial properties (once I've gained more experience and success).
Some questions:
Q. Is there a much more effective process than this? Scenario: I acquire property A, with a monthly mortgage of $700/ mo. I then make minor improvements and market the property for rental. I get it rented out for $1000/mo for a profit of $300. I then repeat the entire process.
Is this how most investors are doing it? Or is there a more effective way out there?
Thanks in advance.
2 Answers
Not necessarily, obviously you need capital to buy the properties so its not just a case of buying up everything you can see.
Then there's all the related costs - advertising for new tenants, maintenance of the property (not just if the boiler needs replacing, but also if the tenants ruin the carpets etc)
and then there's the missing income - if you have a tenant for 6 months, and it takes a month to attract a new one (plus get the property ready for them), you're missing $1000.. times 2 per year means your profit drops by quite a bit. In addition, you have to cater for the cases where the tenant just decides not to pay for a while and then skips town.
Property investment is not the easy-road to riches that many say they are. They require a lot of dedication and hard work, and careful consideration of your accounts. Oh, don't forget that $300 per month profit gets taxed too.
If you do, check the actual rental prices for properties in the area, compare to the value of the houses/flats - it is very possible that the mortgage will be more than the rental, especially in popular areas.
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+1 you're absolutely right. Many people that run these types of businesses have invested significant amounts of money into their properties. Generally they're all paid off already as most lenders are hesitant to give a mortgage if you already have a mortgage, let alone dozens (which you will need to have any sense of profit.) I have a friend that is doing this and he usually holds the houses for a few years then sells them for a profit, using the rent to cover costs such as the management agency and ads. Doing this on about 24 homes he makes a nice steady income of about $75k or so a year. – Randy E 11 years ago
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Thanks for all the replies. It makes sense. I will continue to research and continue. It just found this very interesting -> Doing this on about 24 homes he makes a nice steady income of about $75k or so a year. – Marco Trinidad 11 years ago
I have a property in Ontario. It is a student rental house with 9 units. It brings $2000 net profits a month. I think the key point are two:
- How much you buy below the market price. This is you exit. e.g. If you buy a house by $150K(but the actual value is $200K). Then if the rental is not good, you can just sell it for $180K. You still have profit.
- your down payment is a key factor of the RIO . That is say, you need use bank's money to make money. If you fund the house down payment all by you saving's. you will take too much time to start profit.
I would suggest to take some investor courses and join the local investor club to gain advice.
