If you want to invest in a rental, the time is great! Residential rentals are averaging long-term returns of 7%, nudging out equities coming in at 6.95%. Bonds and bills are no where near those numbers.
Private equity funds are investing in foreclosed homes and turning them into rentals. They’re also providing landlord loans to folks who want to jump into the rental game.
In fact, U.S. returns show yields from rental investments mostly profiting from rental income, but a quarter of those returns are from equity. It’s a great time to invest in real estate and an even better time to invest in a rental!
Here are few ways to jump in:
You can start with a residential mortgage to purchase a single-family home or condominium. You will need the standard 20% down payment to avoid private mortgage insurance. You might have to accept a higher interest rate since lenders generally consider renters to be a slightly higher risk and insurance might be higher, too.
To stretch your buck, two- and four-family units are the way to go. Everything that you do to appreciate the value of your home, such as improving curb appeal and living aesthetics in a single home pays off double, triple, quadruple, and more in a multi-family unit. The nicer the property, the more families want to live there and the more potential for income.
There’s proven demand for rental properties around apartment buildings. Many folks are always looking for a better place to live. A single family home looks very nice to someone who’s lived in multi-unit apartments.
Some homeowners are using their home’s equity to cash out and add on. Renting out spare rooms, creating mother-in-law suites or building freestanding bungalows or cottages are great ways to invest in a rental because you’re investing in your own home. The added income helps pay the existing mortgage or creates a new income stream for more investment opportunities.
Housing has been hot the last few years, with no signs of slowing down. Whether you’re thinking beach, farm, or skiing, there’s lots of real estate available out there. Think Air BNB or timeshares. Renting out your vacation home part of the time offsets your property costs and leaves room for you to enjoy it, too.
There’s lots to like about this deal if you want to invest in a rental. Depending on the platform, you’re looking at low minimum buy-ins. You might be able to invest with as little as $500. You can easily diversify in a variety of properties and you usually start seeing a return within a few weeks.
Steady income, property appreciation, diversification, and tax benefits are just a few of the benefits when you invest in a rental. Financing options abound and interest rates are still relatively low. Contact a trusted lender and real estate agent for more information, and start looking for your rental investment today!