You’ve probably watched the show ‘Income Property’ on HGTV. If not, it’s a show where people buy homes, renovate them and usually end up paying the mortgage with the rental income. Sometimes, buyers even earn more than the mortgage payment. How great is that?! They’re able to build equity in a home and earn immediate income. That’s the kind of investment everyone should aspire to have. Investments are always best when they offer multiple ways to earn money.
Now, I’m not an expert in renovation but I have seen a few people create some awesome income properties. And based on the online research I’ve done, here is the pretty simple process of how to turn a regular property into an income property.
The Home’s Intended Use
Why do you want an income property? Will you use it as a place to live and then get renters to rent out bedrooms? Or do you want an income property with separate living quarters. That means a separate entry, kitchen, etc. for you and your tenants. Or do you want a property that’s purely bought as an investment? Think of your exact goal before buying a home. That’ll make sure you buy a home that’s already well-suited for your mission to be fulfilled.
Location, Location, Location
With physical real estate, location is the most important aspect to consider. Unless it’s a mobile home (a poor investment) it’s hard to move. So the location is something you secure once and you’re done. When buying an income property, it’s important to remember a few things:
Is the neighborhood going up in value?
Is the house close to a location renters will like?
When getting any home, it’s smart to get an inspection. This will (hopefully) reveal any existing or potential future problems. Inspections are pretty low cost so it’s worth doing. Inspections cost an average of $300-$500.
What kind of renovations may need to be done to get the most money out of the property as possible? Will you need to widen the driveway to accommodate more cars? Will you need to put in any egress windows in the basement? Will you need to update the bathrooms so they attract renters with more money? Some reno work will likely need to be done no matter what. Even in a contemporary home, there will likely be a few things you’d like to see changed.
Staging is a stage you don’t want to overlook. If a home feels welcoming and warm, people will be much faster to pull out their wallets. Make sure the rooms look beautiful. It doesn’t cost a lot extra to make a big impression. Consider finding a friend who enjoys interior design. Give them a budget and let them do the work for you. You can probably find someone who would love doing it – even for free.
Listing the property is an important step. In this step, you want to be put your best foot forward. Make sure the pictures are high quality. Make sure the listing is descriptive yet concise. Make sure the property gets as many eyeballs on it as possible. Use free resources like Craigslist. Consider reaching out to real estate agents as well. Spending more money upfront may get you a renter who will pay a lot month after month. An income property investment means investing in more than just the home.
Let the Money Pour In
The beautiful thing about income properties is that they can relatively passively generate income month after month. The value of the home can increase. You will get rental income each month. And you’ll be building equity in the home with each mortgage payment. An income property is pretty appealing don’t you think? Do you plan on getting one? What kind of property would you like?
I’m a personal finance freelance writer and webmaster. I welcome you to visit me at www.thefrugalpreneur.com