House Rental Business have two advantages. Regular rental income will be there. In addition to that there will be appreciation in property value. Persons who have surplus money to invest in real estate can do this business.
There is lot of work to be done before investing in real estate to
actually buying your first rental property. Owning property is a tough
business and the field is peppered with land mines that can obliterate
your returns.
Few of the steps for Real Estate Investments
Starting Your Search
Although you may want a real estate agent to help you complete the
purchase of a rental property, you should start searching for your
investment on your own. Having an agent can bring unnecessary pressure
to buy before you have found a property that suits you. The most
important thing is to take an unbiased approach to all the properties
and neighborhoods within your investing range.
Your investing range will be limited by whether you intend to actively
manage the property (be a landlord) or hire someone else to manage it.
If you intend to actively manage, you should not get a property that's
too far away from where you live. If you are going to get a management
company to look after it for you, your proximity to the property will be
less of an issue. (To find out how to save money as a rental owner, see
Tax Deductions For Rental Property Owners and Tips For The Prospective
Landlord.)
Important things to be considered when searching for the right rental
property.
Neighborhoods
The quality of the neighborhood in which you buy will influence both the
types of tenants you attract and how often you face vacancies. For
example, if you buy in a neighborhood near a university, the chances are
that your pool of potential tenants will be mainly made up of students
and that you will face vacancies on a fairly regular basis.
Property Taxes
Property taxes are not standard across the board and, as an investor
planning to make money from rent, you want to be aware of how much you
will be losing to taxes. High property taxes may not always be a bad
thing if the neighborhood is an excellent place for long-term tenants,
but the two do not necessarily go hand in hand. The town's assessment
office will have all the tax information on file or you can talk to
homeowners within the community.
Schools
Your tenants may have or be planning to have children, so they will need
a place near a decent school. When you have found a good property near a
school, you will want to check the quality of the school as this can
affect the value of your investment. If the school has a poor
reputation, prices will reflect your property's value poorly. Although
you will be mostly concerned about the monthly cash flow, the overall
value of your rental property comes in to play when you eventually sell
it and retire someday.
Crime
No one wants to live next door to a hot spot for criminal activity. Go
to the police or the public library for accurate crime statistics for
various neighborhoods, rather than asking the homeowner who is hoping to
sell the house to you. Items to look for are vandalism rates, serious
crimes, petty crimes and recent activity (growth or slow down). You
might also want to ask about the frequency of police presence in your
neighborhood.
Jobs
Locations with growing employment opportunities tend to attract more
people - meaning more tenants. To find out how a particular area rates,
go directly to the U.S. Bureau of Labor Statistics or to your local
library. If you notice an announcement for a new major company moving to
the area, you can rest assured that workers will flock to the area.
However, this may cause house prices to react (either negatively or
positively) depending on the corporation moving in. The fall back point
here is that if you would like the new corporation in your backyard,
your renters probably will too.
Amenities
Check the potential neighborhood for current or projected parks, malls,
gyms, movie theaters, public transport hubs and all the other perks that
attract renters. Cities, and sometimes even particular areas of a city,
have loads of promotional literature that will give you an idea of where
the best blend of public amenities and private property can be found.
Building Permits and Future Development
The municipal planning department will have information on all the new
development that is coming or has been zoned into the area. If there are
many new condos, business parks or malls going up in your area, it is
probably a good growth area. However, watch out for new developments
that could hurt the price surrounding properties by, for example,
causing the loss of an activity-friendly green space. The additional
condos and/or new housing could also provide competition for your
renters, so be aware of that possibility.
Amount of Listings and Vacancies
If there is an unusually high amount of listings for one particular
neighborhood, this can either signal a seasonal cycle or a neighborhood
that has "gone bad." Make sure you figure out which it is before you buy
in. You should also determine whether you can cover for any seasonal
fluctuations in vacancies.
Similar to listings, the vacancy rates will give you an idea of how
successful you will be at attracting tenants. High vacancy rates force
landlords to lower rents in order to snap up tenants - low vacancy rates
allow landlords to raise rental rates.
Rents
Rent will be the bread and butter for your rental property, so you need
to know what the average rent in the area is. If charging the average
rent is not going to be enough to cover your mortgage payment, taxes and
other expenses, then you have to keep looking. Be sure to research the
area well enough to gauge where the area will be headed in the next five
years. If you can afford the area now, but major improvements are in
store and property taxes are expected to increase, then what could be
affordable now may mean bankruptcy later.
Natural Disasters
Insurance is another expense that you will have to subtract from your
returns, so it is good to know just how much you will need to carry. If
an area is prone to earthquakes or flooding, the extra insurance can add
up and eat away at your rental income.
Getting Information
Talk to renters as well as homeowners in the neighborhood. Renters will
be far more honest about the negative aspects of the area because they
have no investment in it. If you are set on a particular neighborhood,
try to visit it at different times on different days of the week to see
your future neighbors in action.
The Physical Property
In general, the best investment property for beginners is a residential,
single-family dwelling or a condominium. Condos are low maintenance
because the condo association is there to help with many of the external
repairs, leaving you to worry about the interior. Because condos are not
truly independent living units, however, they tend to garner lower rents
and appreciate more slowly than single-family homes.
House Rental Business can be
started in the following manner according to the size and volume of
business and capital investment.
A Proprietorship can be started by single person with the following facilities:
Office
Rented or own office
Staff
Facilities
Opening of Bank Account
In India, Bank Account of a Proprietorship can be opened by giving the following documents:
But in other countries, documentation procedure will be different according to the law of land.
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Different modes of advertisement like news paper, internet, pamphlet, hoardings etc can be used according to the budget.
A Partnership can be made by two or more persons by creating partnership deed.
Registration of Partnership Deed
In India, it is not compulsory to Register a Partnership deed. But an un registered partnership have some disadvantages in the eye of law. So it is better to register the deed with the Registrar. A Registered partnership firm has all the right to sue in a court of law in India. But in other countries there may be differences in rule.
Office
Rented or own office
Staff
Facilities
Opening of Bank Account
In India, Bank Account of a Partnership firm can be opened by giving the following documents:
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Different modes of advertisement like news paper, internet, pamphlet, hoardings etc can be used according to the budget.
A Private Limited Company can be registered by minimum of 2 person and maximum of 50 persons. There are many advantages of registering a private limited company. A Private Limited company can be registered with limited liability, which will protect the personal asset of the business man in case of failure of business.
Registration of Private Limited Company
In India, it is compulsory to Register a Private Limited Company. It can be registered with the help of a Practicing Company Secretary, Advocate or A Chartered Accountant. Facilities required for Business are:
Office
Rented or own office
Staff
Facilities
Opening of Bank Account
In India, Bank Account of a Partnership firm can be opened by giving the following documents:
Advertisement
Different modes of advertisement like news paper, internet, pamphlet, hoardings etc can be used according to the budget.
A Limited Company can be registered by minimum of 7 person and there is no maximum limit of members. There are many advantages of registering a Limited company. A Limited company can be registered with Limited liability, which will protect the personal asset of the members in case of failure of business.
Registration of Limited Company
In India, it is compulsory to Register a Limited Company. It can be registered with the help of a Practicing Company Secretary, Advocate or A Chartered Accountant. Facilities required for Business are:
Office
Rented or own office
Staff
Facilities
Software Development
Software can be Developed according to the needs of the organization and clients.
Opening of Bank Account
In India, Bank Account of a Partnership firm can be opened by giving the following documents:
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Different modes of advertisement like news paper, internet, pamphlet, hoardings etc can be used according to the budget.