3 Principles of Passive Income - Home Rentals

Investors use passive income to broaden their portfolios. There are certain principles that you must keep in mind in order to achieve success in this investment arena. One of the most common passive income investment tools is real estate.  Here are 3 principles of passive income that you can apply to renting homes:

1. Work Hard on the Front End

It's true that you can earn passive income from renting homes. However, if you don't put in the time and effort on the front end, you may earn income, but you will have to work for it. You'll end up working on the property every month to keep tenants happy and before you know it, you'll have a second job.

Instead, spend money and time improving the home before you rent it. At the bare minimum, update your appliances and make all major repairs. Then, as your finances allow, add structures and create a beautiful landscape that will be pleasing to your tenants. This will help to keep them renting longer, and build loyalty so they will keep a watchful eye on your home.

2. Hire a Handyman

Unless you possess the skills of an experienced handyman, you'll want to hire a handyman to take care of all issues that arise concerning repairs. In fact, your handyman can be the first person that tenants call if there's a problem. This frees you up to work on other things, while your handyman looks after the property.

You can work out a retainer agreement with him for a length of time, and agree to pay him hourly. If you're out of town on vacation, or have a job that requires you to travel a lot, your tenants can get immediate assistance from the handyman that you've hired. In some cases, your handyman may agree to a commission based on rent payments.

3. Hire a Property Manager

For the most part, you should live close to your home rental. Long distance property management is difficult. If you must have a rental that's far away, then be sure to hire a property manager. You can ask a real estate agent for referrals of reliable real estate property managers in the area. One of the benefits to hiring a manager is that you won't have to worry about dealing with tenants directly. The manager can hire contractors to make necessary repairs, pay them on your behalf and collect rent. The manager is typically paid a commission on the rents collected. Therefore, you'll have to calculate whether you can afford to pay the commission for both a manager and a handyman.

Following these principles can make earning passive income from home rentals doable and lucrative. If you don't adhere to these, you'll find yourself working harder than ever before.

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