Real Estate

5 Places to Purchase a Rental Home

5 Places to Purchase a Rental Home

Passive income is a buzzword these days. And for good reason. Everyone wants it, but few people understand how to actually obtain it.

With enough passive cash flow, you would no longer need to work a regular job. Instead, you can spend your days, months, and years pursuing the things that matter most to you.

So how do you actually make passive income a reality? One of the best ways is with rental real estate. When you purchase a rental home, you can make or save money in multiple ways.

But monthly cash flow, in the form of incoming rent from tenants, is what will ultimately set you free. And one of the key considerations when purchasing a rental house is the location.

Some locations are way better than others, especially for new investors. So where are the best places to invest, to ensure positive cash flow for decades t come? Keep reading to find out now.

1. Your Current Town

Whether you choose a long-term rental or a short-term vacation home, it’s hard to beat the convenience of renting in your immediate area. While the town you live in may not be the most ideal place for a rental, it might still be a good idea.

Every town has a rental market. Whether you are in a big city, a suburb, or a small, rural town, there are people that want to rent.

And if there’s a hotel within 10 miles of you, there’s a market for short-term renters as well.

When you rent in your current town, you can manage the property directly as a landlord. This can save you money by not having to pay management fees. And it can provide you with hands-on landlord experience.

Plus, you know the ins and outs of your neighborhood already. Investing in a market you understand is a much safer idea than investing in a market you have no experience with.

2. College Towns

Every state, and every region within every state, is home to colleges large and small. College towns are one of the best places to invest, as you will always have a steady stream of well-funded renters.

Many students prefer the flexibility of renting a home rather than an on-campus apartment. And with scholarship money, student loans, and money from parents, students are surprisingly capable of paying for it.

With a decent home near a college campus, you shouldn’t have to worry about vacancies very often.

3. Suburbs Near Big Cities

Another place to look for rental properties is in the suburban neighborhoods surrounding large cities. Investing in the downtown area is cost-prohibitive to most DIY investors, so your best bet is looking outside the city center.

Homes are more affordable, and more and more workers are looking to live outside the city, even if their job is downtown.

4. Tourist Destinations

Tourist destinations near the beach and other natural attractions like state parks or national parks are good places to rent. If you want to invest in a vacation house, then these types of locations are the cream of the crop.

People are already looking for accommodation in these areas for their vacations. And more and more people are ditching hotels to stay more comfortably in a properly furnished home.

5. Downtown

Depending on where you live, it might make sense to invest in homes downtown. This is much harder to do in major metropolitan areas. But in smaller towns and cities, investing in the downtown area can be very affordable.

And in any town, this is where most young people are looking for homes and apartments to rent. So with a quality building kept in good repair downtown, you should never be dealing with vacancies.

Of course, investing in larger cities is a great option as well, but the price tag is much higher. Typically, these homes are purchased by well-funded, seasoned investors who can pay cash, crushing the competition.

How to Purchase a Rental Home

Purchasing your first rental home will be an in-depth process, but it doesn’t have to be as hard or take as long as many people think. There are quite a few steps involved, which will get easier with every rental property you acquire.

For starters, you’ll want the best credit score you can get. The higher your score, the more a lender will trust you. You’ll enjoy a lower interest rate on the mortgage, which can save you thousands over the life of your loan.

Then, you need to get financed. Getting financed means you have enough funds to cover a down payment, as well as monthly reserves, as well as a mortgage.

There are many different loan programs available for financing a rental property. Discover more here about the most common financing options for new investors.

In general, for a property you won’t be living in, you can expect to put 20% down. If you don’t have that much cash, you may be able to tap into your current home’s equity to use as a down payment.

With a preapproval letter in hand, you can reach out to local real estate agents. You can make an offer on the perfect house with their help, and negotiate with the buyer to get a good deal.

The best investment properties are those that you can pay a wholesale price on, not retail. It’s hard to earn monthly cash flow if you are overpaying for a property.

Don’t be afraid to look for outdated homes that need a bit of work. You can get a much better idea loan these properties. And once you fix them up, you’ll boost your equity.

Rental Markets Are Everywhere

No matter where you look or where you live, rental homes are in style. There will always be people who prefer to rent or who have to rent for a period of time.

So whether you purchase a rental home in the middle of nowhere, or are investing in the hottest market in the country, with a good strategy, you can start making passive income and building your wealth.

Looking for more investment tips like this? Head over to our blog now to find other helpful articles.

Arnold Bloom

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