Investing in rental properties is a wise way to set yourself up for financial freedom. Regular income from tenants can fill your bank accounts long after retirement, eliminating the need to work into your old age for a comfortable lifestyle. According to Forbes’ article “Best Buy Cities: Where to Invest in Housing in 2016,” this year has experienced an increased demand for rentals due to rising home prices and the wages of middle-class buyers at a relative halt. This has lowered buyer activity and increased rent across the country, making this season a great time to cash in on this lucrative market by becoming a landlord.
Where is a good place to invest in the United States?
Florida takes the prize for the best state for landlords, having 7 out of the 20 cities on Forbes’ top 20 list: Orlando, Ft. Lauderdale, Cape Coral, North Port, Tampa, Jacksonville, and West Palm Beach. Texas is also a great place to invest. Three cities in Texas that are booming are San Antonio, Dallas, and Austin. Home values in all these cities average in the low 200 thousands. Each city has been evaluated in terms of job growth, population growth, and rising home values. In the cities where rent is in high demand, expect leases to be at a premium, especially near the coastlines or popular metropolitan areas. For example, in the city of Jacksonville, the average rent is $1,620 a month at trendy Jacksonville Beach while units in East Jacksonville average at $561 per month.
Let a real estate agent help you invest.
Knowing where to invest in a booming city is crucial. Your real estate agent has the experience to spot out a property in an area that is in high demand and will grow in value over time. He or she can take you through the entire investment process, from making an offer on a unit to taking you to the closing table. Agents can also connect you with a property manager who will help facilitate rent collection, any repairs, or help with any other issue for a small percentage of the monthly rent. If you are not local or have over three units, having a property manager is highly recommended to keep your tenants happy and reduce landlord stress.
Think beaches. Think warm weather. Florida is the hub of vacationers, retirees, and affluent homeowners looking for that vacation home for the off-season. Florida’s real estate market has recovered remarkably well after the great recession, and there is no lack of renters looking for a place to stay, whether it is long-term retirement or for a week-long vacation in Orlando’s Disney World. Also, according to Florida TaxWatch, nearly 250 thousand jobs were added to boost the sunshine state’s economy, bringing in more people.
You can mainly attribute this state’s great rental market based on incredible job growth. The energy boom has led to more jobs in petrochemical construction, while tech jobs are also on the rise. Lower gas prices are helping the economy too. In addition, Toyota, State Farm, and Liberty Mutual Insurance relocated to the Texas capital, causing many employees to follow them. Tons of employees moving in because of their jobs means that there are many people who are seeking temporary living situations while they grow roots. There is also a current shortage of housing that making rents in high demand , with the average 2 bedroom apartment in Dallas going for a pricey $1,465/month.
How much money will you make?
That’s up to you. Rental investment starts out more slowly than other types of investments and requires patience. Your earnings will depend on many factors like if you can make a cash purchase, how many repairs the unit needs, if you bought the property at full price or at a bargain, what neighborhood it is in, and its current market demand. Also, the more units you own, the more earning potential you have. When you list your property, you will make the rent match market value, usually a few hundred dollars higher than the property’s standard mortgage.
If you bought the property with a loan, you would need to use the rent to pay down the loan and thus be making a modest profit from the rent you collect. However, over time, your tenants will pay off the loan, making you the owner of a paid off rental unit. If you buy with cash, however, then you save on any interest you would pay on loans and pocket the entire rent check every month. Another factor to consider is that rent prices also increase yearly so you will also earn more over time.
2016 is the year to invest in rental properties.
Rental investment is an exciting and lucrative opportunity that sets you up for steady, lifelong income that only grows as you gain more property and pay off units. It takes work to make the right buying decisions to invest properly, but once you have a system, you will set yourself up for a comfortable life that lasts long after you retire.