Realtor listing Sotheby’s International Realty Scott Startsman and Drew Read share their tips on how you can buy property and rent it out for passive income.
One way to grow your investments is to buy a property and then rent it out to generate passive income. We spoke to real estate agents Scott Startsman and Drew Read of List Sotheby’s International Realty for their ideas on how to make rental properties work for you.
1. Run the numbers.
“For many people getting into this business for the first time, it’s easy to want to buy something attractive and shiny,” says Startsman, who has worked in real estate in Hawai’i for 20 years, “ but that’s usually not the right way to go, and the decision should be a matter of numbers.
He says his uncle taught him that real estate is great because it’s tangible.
“You can touch it, smell it, and enhance it,” says Startsman. “You could get an old house, paint it, add value and raise the rent. The more you are able to do it yourself, the more value you are able to generate for yourself. »
On the other hand, he says, tangibility can also be a downside: maintaining the property and managing tenants, after all, is hard work.
Similarly, another List Sotheby’s International Realty agent, Read, recommends finding a repairer with a lower price and then working to increase the value of the property. This is an ideal route for people who are DIY enthusiasts or have family and friends who can help repaint the walls or redo the floor. Once the house is renovated, you can rent it out at a higher rate than the mortgage you’re responsible for, and then bring home the extra money.
2. Play the long game.
Startsman is a firm believer in buying for the long haul, then patience. Buy the property with a mortgage so the rents are balanced, Startsman says. You won’t see big returns at first, but you will see the return benefits of ownership exponentially over the long term.
3. Single family homes vs. condos.
While it’s possible to buy a condominium property to rent out, Read recommends opting for single-family homes instead, since condos generally come with more risk and hassle. “Dealing with plumbing leaks, maintaining elevators, scheduling water outages, and dealing with rising HOA fees can all make renting condos more complicated and expensive than a single-family home” , he said.
4. Be a good owner.
Don’t be absent! Work to be a good landlord and try to establish a positive relationship with your tenant based on trust. If your tenant lets you know that something is broken, whether it’s the washer or a leaky faucet, make it your priority to fix it. “Responding quickly not only strengthens your relationship with the tenant, but also saves you from future problems that could decrease the value of the property,” Read says.
Remember that a happy tenant is more likely to stay in your rental property longer than an unhappy tenant, and you won’t waste time and money constantly researching and finding new tenants.
5. Consider hiring a property manager.
If you have a busy job, a family, or are new to the rental business, Read recommends looking for a property management company. A reliable third-party company will help you screen potential tenants (background checks, credit checks, interviews with previous owners, references) and handle rental payments and communications with tenants. The company will also have a list of reliable handymen and other connections you may need to maintain the property. Having a property manager allows you to “set it and forget it”, so you can manage the other important issues in your life. The company will usually take 8% to 10% of the rental fee as payment. If you decide to go this route, be sure to meet and interview at least three property management companies to find the right one for you. Pay attention to their speed of response, their professionalism and the type of properties they work with.
Sotheby’s International Realty List can help you find the right investment to get started. If you are looking to buy a property to rent, visit the List Sotheby’s International Realty website for a list of real estate agents and properties.
Scott Startsman, Realtor-Associate®, License HI RS-62384, (808) 291-5441, scott@hiestates.com. Visit his agent profile here.
Drew Read, Realtor-Associate®, License HI RS-67769, (808) 782-3636, drawread@listsir.com. See his agent profile here.
