An area which I am not yet invested in, but am thinking about, is rental property. Currently I receive monthly income from my dividend stocks portfolio, P2P lending with Lending Club, and various online money making ideas. Diversifying further into real estate seems like the next step.
I would gain a real asset on top of the actual rental income, the best part being that the rent each month should cover the mortgage payment I’d owe and leave a little leftover as extra. So my tenants would be helping me pay off the house and in the end I would own the house and have an asset which hopefully appreciated significantly. At which point I could live in the house, continue to rent it, or outright sell it.
Currently I live in an area (NYC Metro) where housing prices are very high which makes this plan a bit prohibitive. Sure, the rent received would be higher vs other parts of the country, but so are the taxes and to put 20% down would require a significant upfront investment dollar wise. Because of this, I am looking to invest “remotely” into other markets around the US making the 20% down payment more feasible (plus using leverage (debt) amplifies the potential return). Since this will be my first venture, I am looking to buy a single family home (as opposed to an apartment building or multi-family house) due to the lower down payment needed, less potential headaches with 1 tenant, and (hopefully) easier learning curve.
Besides the rental income from the property, there are also tax advantages to owning real estate which makes the deal sweeter. I know when choosing the house to buy I need to look at the local crime level, future growth potential, quality tenants, etc.
Do you have experience with rental income? Any suggestions or items to watch out for? Hot markets? Please let me know in the comments below!