Rental properties are one of the most common types of real estate investments and for good reason. Owning real properties offers a source of ongoing and passive income. Also, holding a property long-term creates the opportunity for the property value to increase.

Short-term investments, like fix and flip or wholesale deals produce quicker profits, but buy and hold builds long-term wealth. Deepen your real estate investment portfolio with a combination of real estate investment strategies.

How Rental Properties Build Wealth

Rental properties open the door to wealth. These are investments designed to buy and hold. Unlike short-term investments, rental properties don’t produce a quick win. However, buy and hold properties withstand market fluctuations. With rental properties, you look at the long game.

Rental properties offer the benefit of passive income. Passive income simply means you receive ongoing income without ongoing work. You are free then to use your time on riskier and more time-consuming investments, like fix and flips.

Rental properties produce rental income to cover the ongoing costs for upkeep and maintenance. If the rental rate is greater than the costs, you make a monthly profit. The real wealth comes from the increased value of your net worth from the property value of your rentals. Rental properties make an effective way to build wealth and long-term financial security.

Diversify Your Buy and Hold Rental Property Portfolio

Rental properties come in many shapes and sizes, and you don’t have to stick with one type. In fact, diversifying your rental strategy helps protect you from a shifting economy. Virtual real estate investing makes it easy to invest in different geographic areas, like college towns or popular vacation spots. Consider short-term vacation rentals using online tools to attract renters.

Long-term rental properties usually require less administrative work and maintenance than short-term rentals. However, you may want to renovate the property before you place it for rent to command a higher rental rate.

Also, look at different types of properties. Consider what types of rentals the market demands in various areas. You may want to own condos or townhomes in one area and single-family homes in a different area. Foreclosures, probate properties and tax delinquent properties are a good source to locate new rental properties.

Get Started with the Three E’s

If you are new to real estate investing or simply want to add rental properties to your investment portfolio, start with the three E’s for rental property investments.

1 – Educate

Like with any new investment strategy, take the time to learn from others. Online resources provide limitless access to information for real estate investors. You’ll find free and paid sources, both of which offer pros and cons. Free information is readily available in the form of blogs, videos, podcasts and much more. Make sure you use reputable sources to ensure the information is accurate.

Paid training usually includes a more personal approach or more detailed information. Classes, coaching and live events all help build your knowledge and your network. When you desire specific information, like learning about buying and marketing rental properties, these options work well.

2 – Execute

Once you have the information and a plan, it’s time to act. Start small to avoid feeling overwhelmed. Purchase one unit or a single-family home at a lower market price. As your confidence and knowledge grow, add properties to your rental portfolio.

Remember to try different types of properties to determine what works best for you and your budget. You may find you prefer multifamily housing over luxury vacation rentals. This is part of the process. Also, because this is a long-term approach, you have time to learn and grow.

3 – Endure

Don’t give up if you face a failure or obstacle. That’s part of the process. You may run into challenges with funding, vacancies, property managers or past due rents. These are normal and not a reflection on your worth as a property owner. Learn from your mistakes and keep trying.

Over time, your confidence will grow, and you’ll understand the warning signs and pitfalls. However, if you endure, your rental property investments create a path to long-term wealth.

Protect Your Real Estate Investment Business

Did you know that 50% of new businesses fail within the first five years? One of the biggest reasons is poor financial planning. As a real estate investor, you are a business owner. Rental properties are one way to protect your business.

By adding rental properties to your portfolio, you add stable income and assets to your investment business. If you run into financial challenges, you have the option to increase rents or sell the property. This provides financial padding for your business.

Also, if the market shifts and funding become more difficult to secure for new deals, your rental property income serves as a source of cash to continue your business operations. While wholesaling and short-term investments offer a more dynamic approach to real estate investing, rental properties offer stability. Real estate investment is more than buying and selling properties. It is a lifestyle that creates freedom and wealth.

Benefits of Rental Property Investments

No matter where you are in your real estate investment business, rental properties are a smart strategy. With rental properties, you have the benefits of financial freedom and a flexible schedule. Plus, when you invest in rental properties, you build monthly income.

However, the market value of the property is arguable the biggest benefit of rental property investments. Over time, it’s possible to own many rental properties that build massive wealth. In fact, investing in rental properties can create a snowball effect where you have more capital to purchase even more properties. The sky is the limit when you educate, execute and endure with your rental property investment business.

Article Source: https://www.biggerpockets.com/