In a previous blog post, we outlined the benefits of investing in rental properties. Once you decide to take the plunge, there are many great opportunities to explore within the residential real estate market. So many, in fact, that we’ve asked Realtor® Keven Braet to tell us a bit more about the kinds of investments available.
Investing in residential rental properties can mean anything from renting out a space in your own home to purchasing multi-unit apartment buildings, buying a second single family dwelling for tenants or even renting out pads for people to put their trailers on. With so many ways to invest, Keven says, “there is likely an opportunity to realize extra income in the residential rental market that suits your personal situation and comfort level.”
Properties with the biggest returns
There are a lot of considerations to take into account when assessing the potential return on any investment, but Keven says,
“In general you will be able to realize a larger rental return on your investment if you are willing to take on an investment property in less desirable areas of the city. As with all investments, the higher reward will be directly related to the risk you are comfortable with.”
Many people have thought about buying an investment property with the intention of fixing it up before renting it out. They hope to get a bigger return on their investment by doing so.
“This is often the case but is not a rule of thumb to be relied upon. Properties are cheap for a reason. Most investors are not familiar with renovating and grossly underestimate the cost of a renovation while grossly overestimating their ability to do the work,” Keven explains.
Keven recommends being realistic about taking on a “project property.” If you have the skills and the time, doing some renovations can be a great way to add value to your rental property. If not, think about the potential cost of an unfinished project.
“If a project stalls and does not get finished, the dollars saved buying cheap will quickly evaporate.”
Investments with the least hassle
All rental investments involve some degree of work, and some properties are certainly more work than others, but there are options available for those who are looking for less involvement. As Keven explains, less hassle may suit a lot of investors, but it usually also means smaller returns.
“Turnkey investments in managed buildings with existing tenants are the least troublesome but often do not fully carry the cost of the investment. In these low risk investments you will be receiving a much lower reward. In most cases you will be relying on the property’s increase in market value over time to give you a return on your investment. This is because the rents received do not cover or barely cover the cost of carrying this type of property.”