There are several ways to make money out of real estate, but if you want to make sizeable investment in property then one of the ways you can do it is by buying and renovating houses that you can rent out to other people.
Getting started is the hardest part, but once you have some experience you can use it to advance and get more properties. The idea behind this method of making money is quite simple, but it still helps to go through it step by step to make sure you can really make a profit from it.
Research is key. What you need to do is buy a property in an area where you have a good chance of being able to rent it out again very quickly. You might need to renovate it up a bit but unless you want to do a big building job you are better off buying somewhere that doesn’t need a lot of work doing to it, as you’ll be able to rent it out far more quickly.
You also need to find out what the average rents are in the place where you are thinking of buying. You need to be sure that they are higher than the amount you would pay for a mortgage each month otherwise you won’t be making a profit.
Make sure you have a proper rental agreement drawn up by a professional such as a lawyer so that both parties understand the situation exactly, and the amount of rent due to be paid and when is clearly indicated.
If you can rent out the property for a few years while it increases in value, you may then be able to refinance it and buy a second property to repeat the process. There is no guarantee of course that the valuation of your properties will continue to climb and we all know that they can drop on occasion, but provided you don’t overextend yourself you will hopefully be able to ride out any changes in property prices.
This does illustrate the need to make sure there is a good cushion between the amount you are paying for your mortgage and the amount you are collecting in rent each month though. The more cash flow you have, the better.
It’s also wise to make sure your properties are near where one of the Chama members lives, because if your tenants encounter problems that one of you needs to sort it out, a Chama member will need to be on hand to solve them – or at least get a professional in to do it. If none of you wants to be involved in the day to day management of your rental properties, you might want to invest in the services of a real estate management company if you have several properties that you want to rent out to other people; these companies take over the day to day running of them for you for a small fee, and it can save you a lot of headaches, especially if you are looking for other properties to buy and rent out and you haven’t got the time to do it. Some companies you can work with include Lloyd Masika, Tysons, Crytal Valuers among others.
In short renting out houses can be a good way to build up a monthly income for your Chama. What’s more, if the value of the properties goes up as you pay your mortgage each month, you might be able to sell them for a decent profit in a few years from now.
This post was written by Chamasoft
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