2021-08-05

Guide of making money with rental properties

A Quick Yet Full Guide Of Making Money With Your Rental Properties In 2021

When you buy a commercial property, there are more ways of making money on it than just let it for rent to tenants. We are reviewing these options in the article.

Making money with rental properties: what to start with

To start making money from renting houses, you shall estimate important criteria of your property from the financial point of view. We’ve already highlighted the entire process of estimation and submitted important indices in our article “Valuable Information On How To Analyze Real Estate Deals And Understand Their Attractiveness”.

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There, particularly, we explained and calculated such indices as real estate metrics, ARV, net operating income, cash flow, cash-on-cash return, and ROI. This material would be really helpful to read to every newcomer to the market of rental properties.

Next, you have to consider what exactly you could earn money from this or that object of property, as letting it for rent is only one of the scenarios (we’ll review them in the next chapter).

Other things you have to consider are the pros and cons of your purchase.

Pros:

  • Real monthly income
  • A possibility to finance the deal with attracted money from the bank and from the people who are ready to be your investors
  • Property’s positive appreciation in future years
  • Real estate tax benefits
  • It is one of the most reliable investments compared to the rest of the options & the stock market.

Cons:

  • Real estate is mostly illiquid and cannot be sold really quickly unless your object is fantastically superb
  • You have to manage the property or find someone who will
  • This is not a passive income since there will be demands and requests from tenants, which you’ll have to fix, as well as there are taxes and utilities to be paid and various issues connected to the property to be solved
  • You can’t know whether your neighborhoods will decline or rise in the future
  • You might spend many months doing your research and searching for objects.

Guide on how to make money on rental property

  1. Renting. Renting is something most people go for when they have a vision of running a rented property, will for doing it, and enough money to buy or finance. Yes, there will be associated risks and hardships. But if you are zealous about your work, then success becomes much more a result of diligence and persistence than a result of applied talent or skills. Eventually, even if you gain 5-15 kilo bucks a year in pure money (given all expenses and coverage of financing), you are doing well.
  2. REIT. REIT is a real estate investment trust (fund). You invest some money in REIT, factually, becoming an owner of some small part of real estate, one of many under the umbrella of this particular REIT. An entrance threshold in REITs can be very small, like, $500. In return, you will get monthly or annual profits from managing property, a part of which you own (doing nothing on your side, in fact). Usually, net profit lies anywhere between 0% and 20% annual. Most likely, it will stick with 5-12%. Alternatively, you could invest in real estate stocks or their derivatives.
  3. Crowdfunding. It is an alternative to REIT, only this time it is YOU who is the owner of REIT. You gather money from people to buy and manage real estate objects and then you distribute a yearly profit. Pay attention that it is a very risky activity, which must be done by professionals. Diving into crowdfunding, not knowing how to make money with rental property professionally, the same as not knowing how to find the best objects may turn into dramatic losses for you and your investors. For the same reason, when you ponder about investing in REITs, you should only pick those trusts, which have a positive background and a good history of earnings.
  4. Short-term rent. This can be anything, including Airbnb, Sonder, Vacasa, booking.com, VBRO, or other short-term rentals, out of a hundred of all existing in the world. According to market participants’ estimates, a price of 10 days in short-term rent can cover a month of long-term rent cost. Bear in mind that some neighborhoods do not accept short-term rentals in their area or have increased taxes on them, so consider these restrictions beforehand.
  5. Renting a house by pieces. Sometimes, you just can’t find a tenant for the entire premises and the option arises – what if you could let it to several people? If they agree to live each in their room of several-bedroom capacity conjoined by one kitchen and one bathroom, then, you could potentially lower the vacancy rate of your object and make similar money. The same goes if you’d let out one or a few rooms of your private house to someone (the latter is called “house hacking”).
  6. Fix and flip. At times, this can go even without a “fix”. The nature of this type of real estate earning is that you acquire some object and then resell it over time – this can be months or years. Usually, to increase the cost of the property, it gets renovated and even modified – like, adding a pool, a garage, or another floor. Pretty often, some renovated property is then let for rent for two reasons: 1) if the price of sale is not too big after renovations so one needs to hold more time, and 2) while waiting for a better price, the rental payments will add up to the cash. You could also hold some object for 5-10-15 years without making anything in it, expecting the price growth but this is rather a rare approach.

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More about DGY

DGY is a real estate investment and property management company. Our experts have an impressive experience in turning businessmen into smart real estate investors. We collect limitless opportunities throughout the world’s best real estate markets and help our clients implement the best deals. We take care of all due diligence and customize documentation while your income grows. We also provide you with property management services so you can forget about the tiresome maintenance of several objects and entrust this process to professionals.

Investment advice and recommendations

DGY is an investment company that takes care of every client and helps them become successful investors. With the help of an investment experience and a well-thought plan, we will help you examine the market, choose a strategy specifically for you or your business, and calculate future costs to start making money with real estate investment.

Property management

In order to invest in real estate, you should consider how you will run your management in Ukraine. DGY will help you eliminate all possible pitfalls at an early stage as a personal project manager will be assigned to your case. They will assist you in choosing the project according to all required objectives.

Property Renovation

DGY Investments takes care not only of purchasing property but also renovating an existing one. With the help of a thorough plan and estimating, we will thoroughly prepare a property for sale. Our professionals evaluate an investment property and create a strategy that includes the costs for renovation, possible taxes, fluctuations on the market, etc. Therefore, our clients are able to resell the renovated properties in Ukraine with more than 15-20% profit from the initial price.

Paperwork

Before our clients decide to deal with real estate investing, they consult with our experts concerning details such as the necessary documents needed to purchase a property and successfully run all the processes connected to it.
Therefore, if you are eager to invest in Ukraine, it’s essential to have all the paperwork done correctly, and that’s the moment when our team of experts takes care of this step. DGY Investments helps investors buy real estate property, manage the paperwork, start preparing relevant documents for purchasing realty in Ukraine, and close the deal successfully.

Real estate investment opportunities in Ukraine

When an investor decides to invest in real estate in Ukraine, the most affordable way to attain stable passive income is through buying residential real estate. Investors can expect to receive a regular monthly payment from their tenants at a fixed monthly amount, unaffected by inflation or other unforeseen circumstances. The amount of rental income will vary depending on the size, type of property and location. For example, buying an apartment in Ukraine’s capital Kyiv is beneficial to investors due to offering a large working population, central location and affordable prices. Hence, the minimum price of renting a decent one-bedroom apartment in Shevchenkivskyi District will be around $1000 per month in 2021, followed by Pecherskyi District with a cost of $850 per month. Besides, investing in real estate in Ukraine annually brings clever investors up to 15% of yield, attracting many business people every year.

Properties for investments in Ukraine

Ukraine has a giant sector for real estate investing. Businessmen who come there all over the world often choose between investing in residential and commercial properties. The main advantage of buying property in Ukraine is the affordability of prices on the houses and apartments. For instance, if you invest in real estate in a historical district, a luxurious apartment will cost you around $80k only.

How to invest in Ukrainian Real Estate

In order to invest in Ukrainian real estate, you should take into account a list of crucial factors. The first one is to choose what kind of realty you are going to invest in: residential or commercial. It is vital as it should comply with Ukrainian real estate law. The second tip is to identify the purpose of purchase in order to make a strategy for the property. For instance, you may purchase the property for your own use or buy it for lease. The next step is to calculate the taxes and what kinds of taxes are payable during the purchase, owning, or selling. Also, to invest in real estate properly, you should keep in mind currency control rules in Ukraine to sell a property and get a higher profit.

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