Real Estate Rentals: A Passive Investment Technique

Real estate can be a great way to make a turn-key investment in property, but you need to go in with your eyes open. Otherwise, you could end up losing your nest egg.

To invest in real estate, you need to have a rainy day fund. Things happen - you're the landlord now, and you'll have to pay if something goes wrong. If you need to fix the walls, the plumbing, or pay for flea control, you'll want to have some money set aside.

If you're handy, you can cut these costs down, but you can't eliminate them entirely. You also need to make sure you're not paying too much. Don't buy in a super-expensive area - go for something in an "up and coming" place where you can get a good deal and watch property values rise in the future.

If you get locked into a real estate bubble, you may not make your investment back. You need a place where your rental income will cover the mortgage with a cushion for emergencies. Also, make sure to trust the company that is handling the property for you.

Property management can be a great deal - it saves you from all of the hassle. But don't just go with any random, fly by night company. Call reputable realtors and ask their opinion about companies in your area.

They can probably give you a good referral, and it'll be worth your time if you can find someone who will manage it well - after all, you're dependant on them to make sure your property is filled with tenants.