A Goal For The New Year
One of the things I’d like to maybe venture out into this year is the area of property investing. Here’s how it works, at least conceptually: you buy a house (or apartment, condo, etc.) and you are the owner, but you rent it out to someone else who lives there and pays rent to you. Now if you do it correctly, you get paid more in rent than you pay in mortgage for it. For example, maybe you buy a condo and your monthly payment including taxes and everything is $800/month. If you are able to rent it to someone for $1,200/mo, that basically means you are making $400 per month.
Of course there are more factors that come into play in real life, but that is the gist of it.
While it sounds like a good deal, there are some potential issues that can come into play. First, as the owner of the property, you are responsible for any repairs and maintenance. So that’s a potential expense. Second, it’s possible you won’t be able to find a tenant. Using the numbers from the above example, instead of making $400 per month, if you are unable to find a tenant you will be losing $800 per month (the amount you pay to the mortgage). There are also the matters of insurance, and laws you have to be aware of regarding the tenant.
Having an investment property also means your taxes will change. Certain expenses may be deductible, and the rent that you get paid will be considered income. I recommend getting help from a property accountant if you are thinking about buying an investment property.
Of course, choosing a property requires doing a lot of research. It has to meet your needs, be within your budget, be in a neighborhood in which you are comfortable, etc. Just like with the house you choose for yourself, you can’t just go buy the first one you see. Remember that you’ll need to find a tenant who wants to live there, so if the place is a dump you probably won’t have many applicants.
While I’m talking about it, the whole area of passive income is interesting to me. All of my income comes from my job where I work like any other person. I would like to get some stuff set up so that I can make money from other sources while I’m at my job. Even if it’s just a little extra spending money, that would be cool. And if it grows into something bigger, that’s even better.