3 Tips for Developing a Rental Property Investment Strategy in 2020

rental property investment strategy
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About 36% of millennials and 30% of baby boomers prefer to invest in real estate over stocks. They would instead invest their extra cash in long term rental property than put it into the stock market. 

You, too, can successfully invest in real estate. The key to success is having a well thought out rental property investment strategy. 

Try one of these three tips for creating your investment strategy for 2020. 

1. Create a Five Year Plan 

The height of property flipping may have passed, but that doesn’t mean you can’t make money at it. You need to have a longer-term plan. 

In the past, house flippers would buy, improve, and sell all within a few months. These days, house flippers will plan to hold the property for about five years. 

They’ll make improvements slowly over that time while also making money renting the home out. The goal is to have the home’s value appreciate during that time. 

If done correctly, the rental income should cover the cost of the home during the five year improvement period. You shouldn’t be in the hole when you go to sell. 

2. Keep It Long Term 

Just because the real estate market is red hot doesn’t mean you have to sell. Maintaining your rental property creates a positive cash flow. You can maintain this income over many years and have passive income well into your retirement years. 

The advantage of this is that you can depreciate the value of the property. This will help to lower your yearly tax liability. 

For some, the ending of the depreciation period marks when they’ll sell the property. For others, it’s the monthly income that’s important. 

Remember to set aside money for yearly property maintenance and improvements. That way, you can get the highest price for your property when you do finally sell.

3. Choose a Sale Trigger 

For some investors, they go into a property knowing that they’ll sell when a trigger happens. This trigger can be anything that you choose. 

You could hold onto the property until your child goes to college. Then sell and use the money to pay for their school

Or maybe you’ll hold onto the property until it needs a significant repair. The first sign that it needs a new roof or HVAC system means it’s time to put it on the market. 

For others, they know it’s time to sell when they’re ready to move to their dream locale. They’ll hold onto their property until it’s time to retire. Then they sell it all and invest in their retirement property. 

Create Your Rental Property Investment Strategy

Which one of these ideas will work for your rental property investment strategy? Remember, the most important thing is to choose a strategy that you’re comfortable with and makes the most financial sense. 

If you’re looking for a short term investment, then the five year flipping strategy may work the best. If you want long term passive income, then our second tip may work better for you. Or you could choose a trigger that signals it’s time for you to sell. 

Contact us today and let us help you create a property management plan for your rental property. 

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