There is an old saying: the only thing certain is death and taxes. But we’d like to amend that – rental demand should be up there, too. Because people will always need a place to live or stay temporarily, there is considerable opportunity to build wealth with rental property investing in 2023 and beyond. And as you generate passive income and diversify your real estate portfolio, generational wealth becomes a formality.
At mbanc, we have been helping investors live and succeed on their terms for years with DSCR interest-only jumbo loans and with AI-driven real estate investment software, STR Verifi, that enables you to access key data for any property in the USA to forecast rental revenue a property will earn. But, of course, it’s important to take baby steps. Here is how to create generational wealth through the passive income rental properties generate.
How to Build Wealth with Rental Property Investing in 2023
Investing in rental properties is an excellent way to secure long-term and short-term cash flow. In many ways, rental property investing is the best route to generating passive income that turns into generational wealth. But you have to operate strategically.
Do Your Research
Research is essential to build wealth with rental property investing. First-time investors often think an expensive property automatically results in a greater return. But look at more than property value to determine potential returns.
Strategic investing is the name of the game when building generational wealth. To forecast the ROI of a property, look at the market.
“How do properties perform in that market? How much will operating costs be? What about the occupancy rate and the average daily rate you can expect? What amenities and features will equate to larger returns? What about managing the rental property? All of this and more is essential to effective investing,” explained Desh Weragoda, mbanc’s CTO.
With the help of short-term rental data analysis powered by an innovative tool like STR Verifi, accessing all this information (and much more) is easier than ever to select the right property, which forecasts and measures accurate ROI.
Mbanc Hack: Research the laws in the market you want to invest in. Regulations will also dictate how profitable a property can be (and your rights as a landlord.)
Prepare for the Long-Haul
If patience is a virtue, being virtuous is essential to build wealth with rental property investing. Remember – real estate investing is always a process.
You will not build wealth overnight. Having a get-rich-quick mentality does more harm than good. Do your due diligence, and don’t over-invest in a property or invest in the wrong aspects altogether.
Part of this should include creating a business plan and an emergency fund to cover unexpected expenses, like repairs, legal fees, and other costs you can’t anticipate.
Mbanc Hack: Remember to consider inflation. Real estate is nearly guaranteed to increase in value with inflation. By investing in the right markets at the most opportune times, your investment will increase alongside inflation at (approximately) 2% per year.
Continue to Build and Learn
Now, everyone has played Monopoly. Like that game, when you set out to build wealth with rental property investing, you want to start small and gradually build. Patience comes into play at this stage, too.
Don’t start by investing in multiple properties. More debt means more risk. You never know what could happen – whether it’s overspending on repairs, tax surprises, or not forecasting returns accurately, this is a learning process.
“Start with a single property, figure out the process, and once you have started generating income, consider adding another property to your portfolio. Then, rinse and repeat. Always make strategic moves. Managing multiple properties that have yet to provide ROI makes it harder to navigate and exposes you to unneeded risk,” added Desh.
Become an expert and professional in this niche. Network with and learn as much as you can from investors to gain invaluable insights that can help you better navigate this field.
If you want to build wealth with rental property investing, always consider taxes. Failing to plan for your taxes can result in more costs (or worse) in the long run, negating profits.
Just as importantly, when you are planning out your taxes for this endeavor, remember that there are several tax benefits that you can capitalize on to amplify your profits. We advise learning all deductions.
You can deduct most professional (and legal) services that relate to management, like property tax, maintenance, insurance premiums, or losses resulting from a casualty or theft.
Lastly – consider financing. Choosing the right mortgage option is essential to learning how to build wealth with rental property investing.
In many situations, the return on this investment will often be higher when you use loans. We advise you to take advantage of fixed-rate mortgages. For many, DSCR loans or interest-only jumbo mortgages are ideal for investing.
Let Us Help You Build Wealth With Rental Property Investing
True freedom requires financial freedom, which is what you achieve when you build wealth with rental property investing. If you make strategic money moves, you will create passive income that will turn into generational wealth and allow you to build and live out the life you’ve always dreamed of. And, after all, is that not the American Dream?
To learn more about STR Verifi and how we can finance purchasing or renovating a short-term rental, talk to our team today.