Looking to generate a passive income this year? Real estate is a great option, even if you’re a beginner investor. Generating a passive income from real estate involves several different steps. To get started today, work your way through these.
1 . The Location
When you’re looking to get a buy-to-let mortgage you’ll need to think about the location of the property. Research the property market to ensure that this is a lucrative area for an investment. Look at the amenities in the area, from transport to shopping, universities or schools. Think about your ideal tenants and which kind of amenities will be important to them.
Decide if you’d like to choose a market that’s established or a market that’s emerging. The upside of an emerging market is that you’ll be able to get a cheaper property and see returns as the area develops. When you buy in a market that’s already established you’ll get returns right away. The downside is you may have to pay a little more.
Once you’ve chosen the location you’ll need to choose the right property, based on your tenant profile.
2. Figure Out The Rental Yield
When you’ve found a property to purchase you’ll need to calculate the gross rental yield. According to Investopedia, the gross rental yield can be calculated by, ‘dividing the annual rent collected by the total property cost, then multiplying that number by 100 to get the percentage.’ The property cost should include closing costs, renovation, and purchase price. You’ll also want to figure out the price to rent ratio and the capitalization rate.
It’s important to estimate all your costs and profits before you make a purchase. You’ll want to ensure that this property can earn you a nice return. Without a solid understanding of your numbers, you could end up being disappointed!
3. Work With A Real Estate Photographer
To help you market your property, you’ll need to work with a talented real estate photographer. A professional photographer can take stunning images of your property, to help you generate leads and attract tenants. Real estate isn’t just about purchasing a property, it’s about marketing it properly to attract the right people. Without professional photographs, it can be difficult to do your property justice. You’ll want to get yourself top-notch photographs, to stand out from the other listings on the market.
4. Work With A Property Management Company
Generating a passive income is all about taking a hands-off role. When you work with a property management company they’ll deal with the admin from finding prospective tenants to performing background checks and inspections. They’ll handle any maintenance issues, advertise your property, and collect the rent on your behalf. When you’re looking for a property management company you’ll want to find a service with plenty of experience and great reviews. Choosing the right company will give you a hassle-free experience so you can sit back and make a profit.
Once you’ve started purchasing rental properties you may want to keep adding to your portfolio over time. Real estate is a great way to earn a passive income, so long as you work with the right services. There are plenty of investment ideas out there which can earn you a nice passive income.