The key to a successful investment property is accounting for the expenses associated with it and how these compare with what you can make by renting out the property. Here are four tips for figuring out these crucial calculations:
1.Study rents in your area carefully
. The rent you can make on your property is one of the biggest determinants of the success of the investment. If you’re buying a condo in a large building, there should be many identical units available that you can get accurate rents from. If the situation is less clear-cut, you may have to do some trial and error until you come up with fair and optimal rent for your property.
2. Don’t forget about certain expenses
. Buying an investment property means a mortgage, but it also means property taxes, an assessment, and maintenance expenses. You should add all these up when figuring out your ongoing costs.
3. Build in a cash cushion.
Ideally, you want all your combined expenses to be less than the rent you’re charging, and for some money to be left over every month. This can be applied to unexpected expenses, or, when everything is going according to plan, it can generate extra income for you.
4. Trust your property manager
. Investment properties are only successful if they’re not a constant source of frustration. From finding reliable renters, to taking care of building maintenance and collecting rents, a good property management company can take a lot of the guesswork out of having an investment property.
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