Real Estate Investments: What You Need to Know About Rental Properties

Overall, the value of investing in real estate has increased over the past decades. One type of real estate investment is basic rental properties. This type of investment involves buying properties and renting them out to tenants. Before you buy your first rental property, here's what you need to know:

You Will Be Responsible for Paying the Taxes, Mortgage, and Maintenance Costs

One of the first things you'll find out about investing in basic rental properties is you must pay the taxes, mortgage, and maintenance costs for it. This isn't a major issue, however, because you can use the rental income from the property to cover the expenses. In the beginning, you may not make much profit on the house because of having to use the rental income to maintain it. Be careful to not invest in a property in which you're losing money each month. Aim for a rental income that's enough to cover the expenses of maintaining it.

Some Risk is Involved in All Investments

Another important thing to be aware of is that all types of investments come with risk, and real estate is no exception. One of the biggest risks when renting out a property is damage caused by the tenants. You've probably heard a few horror stories from landlords about renters leaving destruction behind, whether intentional or not. Regardless of how careful you are about to whom you rent a property, property damage is a risk you take on.

Set Aside Money for Unexpected Repairs

Continuing from the previous point about property damage being a risk, it's a good idea to set aside money for unexpected repairs. Even if you have good tenants, accidents happen and appliances break. As the landlord, it is your duty to repair the home for the renters. You might not have to make repairs often but when they are needed, they can sometimes be expensive.

Before investing in basic rental properties, you should be aware of the three points listed above. Understanding the risk involved and setting aside money for unexpected repairs will spare you the headache. Investing in real estate is a great opportunity as long as you're prepared and choose wisely.

Sources:

Simple Ways to Invest in Real Estate
investopedia.com

What I Wish I Knew Before Buying Rental Property
thesimpledollar.com