20 IMPORTANT FACTORS TO CONSIDER BEFORE VENTURING INTO RENTAL REAL ESTATE
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Introduction:
Are you considering investing in rental real estate? We have Multiple clinets at Palm Valley Wealth Management whom invest in real estate as aprt of their portfolios. It can be an exciting and potentially lucrative venture, but it's important to take a step back and consider all the important factors before diving in. In this blog post, we will explore 20 key factors that you should carefully consider to ensure you make sound financial decisions in the realm of rental real estate.
1. Real Estate is Not Passive Income:
One common misconception about rental real estate is that it is passive income. However, owning and managing rental properties involves active decision-making and work. From repairs and remodels to finding reliable tenants and managing day-to-day operations, rental real estate requires active involvement.
2. Entry Costs:
Consider the entry cost of rental real estate. With rising interest rates, putting a significant down payment may be necessary to make the mortgage payments viable. It is typically not a good idea to deplete your emergency funds or take out excessive liquidity from other accounts to invest in real estate.
3. Amount of Leverage:
Leverage can work in your favor when investing in real estate. By using leverage wisely, it's possible to grow your investment faster than other types of investments. However, it's crucial to carefully consider the amount of leverage you're taking on and how it impacts your debt-to-income ratio.
4. Consider Separating Finances:
It's essential to create a separate bank account for rental real estate income and expenses. Not only does this simplify your accounting and taxes, but it helps you track the financials of your rental property more effectively.