Buying and Managing Income-Producing Real Estate
Are you looking for an investment opportunity? No, I don’t mean selling skincare or a miracle oil, but an honest-to-goodness, legitimate investment opportunity?
Look no further than investing in income-producing real estate.
Owning real estate can be very beneficial, whether used for personal use or to generate income. In addition, you will find that buying a rental property can be a great retirement investment.
If you are curious about investing in incoming-producing real estate, keep reading to learn:
- How to buy income-producing real estate
- The best income-producing real estate investments
- How to choose the right property management company
- And much more
Table of Contents
- What Income-Producing Real Estate Is and How It Can Make Your Money Work for You
- Types of Income-Producing Real Estate
- 5 Tips When Thinking About How to Buy Income-Producing Real Estate
- PEGGY HOAG REAL ESTATE Is Your Go-To Whether You’re Buying or Managing Income-Producing Real Estate
What Income-Producing Real Estate Is and How It Can Make Your Money Work for You
Investment properties that generate income through rent or capital appreciation are called income-producing properties.
Think about income-producing properties and the stock market as comparable items; they are a way to make your money work for you.
For example:
If you buy a $300,000 property with 20% down, you now owe $240,000. However, you’ll only pay $60,000 for the property apart from maintenance and taxes.
How is this so? Your tenants will likely pay off the property within 15 years, and the market may rise by another 40-50%. Having invested $60,000, you now have a $500,000 investment. Your options are to keep the property and take passive income (i.e., rent income) or sell it.
Types of Income-Producing Real Estate
Investing in real estate can be confusing due to the variety of types available.
You can typically choose one of the following property types:
- Single-family rentals
- Multifamily Plexes
- Turnkey properties
- Duplexes
- Fix and flip property
- Wholesaling
- Vineyards
- Orchards
- Timberland
- Development lands
If you are looking for luxury properties in the greater Portland area real estate market, contact our team of real estate professionals at PEGGY HOAG REAL ESTATE. 503-906-1370
What Are the Best Income-Producing Real Estate Investments?
There are several property types to consider, but what types are the best income-producing real estate investments? Let’s take a closer look at the top three types.
Single-Family Home
A single-family home is one of the most popular rental properties for a beginner real estate investor.
In addition to being affordable, they are also straightforward for beginners to invest in. This is because the property costs less, so one can enjoy lower down payments than traditional investment property financing.
Single-family homes are ideal for long-term traditional rentals since tenants view them as homes, not temporary accommodations. Thus, you can relax for a long time before searching for another tenant — you will enjoy low vacancy rates and continuous rental income.
Multi-Family Home
Multi-family real estate properties are another wise choice.
Due to the close proximity of the units, multi-family real estate properties are easier to manage and operate.
Investing in multi-family homes is the best way to quickly improve your real estate investment portfolio. In addition, it will help you acquire more for less money — it is possible to purchase several income-generating real estate assets simultaneously.
Turnkey Properties
Turnkey properties are another great property investment choice.
A significant advantage of turnkey investment properties is that these properties have been completely renovated into livable homes or apartments.
Compared to a property you will need to “flip,” less time is spent on repairs and renovations. Updating a property can be frustrating, especially if you’re a novice in this field.
The convenience of buying a turnkey property makes them almost always cheaper than building or renovating one yourself.
Furthermore, you can get a bank loan for a turnkey investment property just as quickly as for a house you own.
5 Tips When Thinking About How to Buy Income-Producing Real Estate
#1: Find the Right Location
When buying a home, location, location, and location are the most critical factors.
It is common for people to make decisions based on the home itself rather than the location. It is possible to renovate any home, even changing the size of the house. However, there is one thing you cannot change about your home: its location.
A few tips when looking at investment properties include:
- Stay away from high-crime areas
- Look for school districts with excellent reputations
- Consider if the area has a high homeless population; and
- Look to see if there are junk cars on the street
Why do you want to avoid these areas? You will only be able to rent to tenants who want to live there. It may be a cheaper property to purchase, but it will not be the best investment.
Speaking of tenants, the choice of a tenant is a business decision that should be based on objective facts rather than subjective impressions.
Potential tenants should have:
- An on-time payment record
- A steady income situation
- A positive credit report
- A security deposit that can be used to cover potential property damage
- References from previous landlords
- No prior eviction history; and
- No record of criminal activity
#2: Scrutinize the Data
You should scrutinize the data before investing to determine if the property you’re eyeing is worth the price you’re going to pay.
Additionally, scrutinizing the data will allow you to determine:
- What the monthly payment will be
- What the property can rent for; and
- Maintenance expectations for the year
Below are five steps to get the information you need to do a data analysis:
- Research neighborhood quality and amenities.
- Obtain property value estimates for the area.
- Select comparable for your real estate market.
- Calculate the average price of comparable listings.
- Fine-tune your market analysis with adjustments to your comparable.
#3: Be Realistic About the Finances You Can Invest
Be realistic about what you can afford to invest based on your finances — take a hard look at your financial situation, such as the amount of debt you owe.
By being honest with yourself, you will be able to determine:
- How much of a down payment you may need to put down
- What closing costs you can afford
- The rental income you need; and
- Monthly expenses you can afford
#4: Keep Learning
To become even better at investing in property, keep learning all you can.
Stay on top of your game by:
- Taking part in seminars
- Keeping up with real estate investor blogs
- Participating in local investor groups; and
- Keeping up with economic trends
#5: Plan for Property Management
When you become a property owner, one of your first decisions will be whether to do everything yourself or hire an investment property management company.
It is true that if you employ an investment property management company to manage your properties, you will be paying them to do so. Still, if the company is good, you can easily find a greater return on your investment.
A property management company will handle all of the following on your behalf:
- Collect rent from tenants.
- Respond to maintenance requests.
- Deal with tenants that are behind in rent.
- Market upcoming vacancies and fill them as quickly as possible; and
- Keep detailed records of everything happening at the property.
If this is the route you decide to take, be sure to find a reputable property management company. A property management company that cuts corners can cost you lots of money in repairs in the future. HOAG Property Management was created to fill the need in the market for a property management company that truly maintains the properties they manage. Call 503-906-1370 and ask for the introduction email to HOAG Property Management.
When paying a management company, expect to budget half the first month’s rent, followed by 8% of that property’s monthly rent.
If you handle the property management yourself, you will be responsible for all the above tasks.
Additionally, landlords are responsible for ensuring tenants meet certain expectations, and you will have to be available to do this 24/7. Understanding the time commitment required for property management is crucial.
Is your real estate investment working for you?
If not, it might be time to turn to the professionals at PEGGY HOAG REAL ESTATE and HOAG PROPERTY MANAGEMENT.
We eliminate the headaches of solving problems for your tenants — contact us today.
PEGGY HOAG REAL ESTATE Is Your Go-To Whether You’re Buying or Managing Income-Producing Real Estate
A member of the real estate industry since 1991, PEGGY HOAG REAL ESTATE is a family-owned and operated company.
We know how to …
- Price
- Market; and
- Lease
… your property based on our experience selling and managing properties in the greater Portland area.
Laws governing landlord-tenant relationships are constantly changing. As a result, homeowners who manage their properties are prone to making costly mistakes.
Our services help you:
- Minimize liability
- Avoid the mistake of under-renting your investment property; and
- Reduce maintenance costs
By letting us manage your rental property for you, you’re free to do what you do best with the peace of mind that comes with knowing we’re on top of things.
Please feel free to reach out to us today.