While buying and renting property can certainly have a “fun” aspect to it, the majority of rental property owners have a primary goal for their investments – and that is to earn an ongoing stream of income.
So, how much income can you realistically anticipate?
The answer to that can depend. In fact, the dollar figure is actually dependent on several factors, such as the amount of your mortgage payment (if applicable), as well as how much you are paying out in expenses such as maintenance, insurance, taxes, and utilities.
In addition, the vacancy rate can also have a big impact on how much you ultimately earn, because going for many weeks – or even months – without a paying tenant could put you into the red relatively quickly.
One “rule of thumb” that many investors use for determining whether or not a property will be profitable is the “1% Rule.” This goes by the premise that if the gross amount of monthly rent – which is the amount of your incoming rent before expenses – is equal to at least 1% of the purchase price, then moving forward may be a profitable endeavor.
As an example, if you purchase a rental property for $100,000 and you can receive at least $1,000 per month in incoming rent, then there is the possibility that you will see a profit. But it is important to understand that other expenses must also be factored in here, too.
One other key aspect of owning rental property is the amount of time that you are spending personally working to manage, market, and maintain it. And, if you find that running your investment(s) is taking up far too much of your time, you should consider adding a property manager to the mix.
In doing so, you can hand off time-consuming duties like searching for and screening tenants, collecting rent, and handling repairs. Want to know more? If you own rental property in Orlando and / or the surrounding Central Florida area, give us a call.