The growth of investment in rental properties has been phenomenal in recent years. Unfortunately, some of the property investors have been quite hasty in investing in rental properties…
This kind of less well-informed real estate investor heard the words “a good idea” blowing somewhere…
And they read and heard in the media that it is the future for the average private investor who wants to diversify his/her assets.
Below you will discover the possible ways of investing in rental properties (in full ownership).
Finally, you will also receive 4 interesting tips and an interesting overview of offers that allow hands-off investing in rental properties.
Table of Contents
- 1 Increased awareness of side effects of rented property
- 2 What are the options in terms of managing rental investments?
- 3 Hands-on method – Managing your own property
- 4 Hands-off method – Use of a property management company
- 5 Other factors to consider
- 5.1 Acquisition of the property: Turnkey versus do-it-yourself
- 5.1.1 Direct versus deferred return
- 5.1.2 Turnkey rental property including management and rental guarantee
- 5.1.3 Offers of hands-off investing in rental properties
- 188.8.131.52 Brussels as an investment location
- 184.108.40.206 Buy a holiday home in France for mixed use (private + carefree rental)
- 220.127.116.11 Recreational real estate as an investment formula in France
- 18.104.22.168 German investment property including guaranteed rental income
- 22.214.171.124 Rented property with all-inclusive rental service in Sweden
- 126.96.36.199 Mixed-use recreational property in Spain
- 188.8.131.52 Samos (luxury mixed-use holiday property in Greece)
- 184.108.40.206 Rental properties and private use in Montenegro
- 220.127.116.11 Investment properties in the United States with guaranteed returns
- 5.2 TIP: Determine how much your time is worth before investing in rental properties
- 5.3 TIP II: Beware of special ownership structures
- 5.4 TIP III: Focus on incoming cash flows rather than on potential added value
- 5.5 TIP IV: Invest in a diversified portfolio, including assets other than real estate
- 5.1 Acquisition of the property: Turnkey versus do-it-yourself
Increased awareness of side effects of rented property
Fortunately, nowadays there is more and more awareness of terms such as risk profile, investment horizon, net return, financing of investment property, management of buy-to-let properties, insurance, rental guarantees and so on.
A common question that often arises these days, especially now that the financial sector is so turbulent, is:
What is the best way to manage my property rental portfolio and what are the additional advantages and disadvantages?
This question is also important for first-time property investors.
Because even if you have not yet bought a buy-to-let property, it is wise to think about all aspects of the investment.
So don’t just think about the return, but also the side effects such as landlord headaches, stress, frustration, vacancy, damage, non-payment, finding and selecting suitable tenants, and so on.
What are the options in terms of managing rental investments?
The management of rental property can generally be done in two ways.
One way is that you as an investor manage the property yourself: the hands-on or active way.
The other way is that you hire a professional company to manage your property (a steward in the jargon) and serve your tenant(s) on behalf of you as the owner.
This is the hands-off or passive way of investing in property on autopilot and the way for buying and letting property without worries.
Below we outline the advantages and disadvantages of both options.
And then you can decide for yourself whether you are better off with a hands-on or hands-off rental investment.
Hands-on method – Managing your own property
Managing your own rental property is often more demanding than most people think.
When you have a paying tenant, you do not have the freedom to “do something tomorrow” as you do at home.
Procrastination is not usually tolerated by tenants…
You should also take into account the legal norms to make your property rentable and thus avoid lawsuits or reasons for non-payment of rent.
The positive side of hands-on investing in rental properties
One of the advantages of maintaining and managing your property yourself is that you will be very involved.
This allows you, as an investor, to keep your finger on the pulse at all times.
Being involved yourself is the ideal way to keep abreast of what the tenants need and what needs to be done in terms of chores or refurbishment inside or outside the property.
Landlords who take such an active approach to their investment property will bond with their tenants much more quickly.
This can ensure that the tenants treat the property with more respect and will be more careful with fitted furniture, plumbing, the kitchen and so on.
A good personal relationship may even result in the tenant remaining a tenant for longer.
Of course, this depends on the kind of bond that is formed between the tenant and yourself as investor/landlord.
The downside of hands-on investing in rental properties
Playing the role of landlord yourself is a time-consuming task. So think carefully before you take the plunge.
If you choose to take care of your property yourself, you must be available to tenants, chase up arrears, find new tenants when the property is vacant and clean and freshen up the house or flat when former tenants leave.
Managing your own rental property also requires special skills such as a minimum amount of manual dexterity.
Even if you have bought a brand new piece of real estate, chances are you will soon need to repair or replace something.
So either you should be able to do chores yourself.
Either you need to know some reliable craftsmen who can do the work for you within an acceptable timeframe.
It is also imperative that you keep abreast of all legal norms regarding the letting of your property.
There are rules that must be followed by everyone.
If you do not respect the legal norms, sooner or later you will have to face the courts.
This active, hands-on way of investing in real estate is only suitable for investors who live a short distance from their investment property.
After all, it is important to be able to intervene quickly if the tenants require it. Tip: You should also absolutely avoid 7 types of tenants as landlords.
Hands-off method – Use of a property management company
A property management company generally manages rental properties by, among other things, finding tenants, collecting rent and solving all kinds of problems that landlords normally take care of themselves.
This allows you, as an investor, to go about your life carefree and has nothing to do with the operational management of the rental property.
In many cases, you can enjoy an all-inclusive service package including a carefree rental service from A to Z.
Such a professional steward also keeps your buy-to-let property habitable and in good condition.
For this, all kinds of safety regulations must be respected and the necessary responsibility taken for maintenance work.
A professional property management company regularly works with local craftsmen and artisans.
As a result, refurbishments and repairs to your property are always carried out thoroughly and reliably.
In practice, such a steward can be active in very diverse sectors of investment property such as student rooms, social housing, assisted living, service flats, garages, recreational property (fully owned or fractional), care home rooms, hotel rooms, mixed-use flats in resorts, residential property, and so on.
The positive side of hands-off investing in rental properties
This type of management is ideal for investors who already have their hands full with other matters such as a busy job, a lively family life, hobbies and so on.
Passive investment in real estate is the best strategy for those who want to earn a return without having to do anything themselves.
It can also be the ideal solution for private property investors who have already invested in a large number of other projects.
It is also the ideal solution for investors whose properties are located far from their homes, making it difficult to travel there quickly themselves.
Foreign properties, for example, can provide a good return this way.
They can always be rented out at short notice by a professional operator, which improves the return.
Think, for example, of holiday homes as an investment in holiday parks or resorts.
Tenants are changing rapidly for this type of investment property.
A professional on-site steward is exactly what you need to enjoy your real estate investment without any worries.
The downside of hands-off investing in rental properties
These professional operators charge a percentage of your monthly rental income for their service and maintenance.
An important point to consider is whether these costs include rental and insurance costs for your property.
In other words, find out what your net return before tax will be (and check whether it is a virtual or real return).
It is therefore important to check your contracts and to scrutinise the company in question.
Ask any question that might be important to ask, so that you are not faced with unpleasant surprises afterwards, such as hidden costs.
Other factors to consider
If you are going to choose from the above investment options, it is also important to think about the search and purchase of the property.
Acquisition of the property: Turnkey versus do-it-yourself
What kind of property will you purchase? Something that still needs work? Or rather a ready-made rental investment?
Direct versus deferred return
Will you take the trouble to renovate, freshen up, adjust to be in line with all the legislation?
With the disadvantages of additional stress and a buy-to-let property that does not immediately begin to pay off…
Or do you see more of a future in a turnkey buy-to-let property that is delivered ready to rent?
In certain instances, you can also count on an all-in management service through such a directly rentable buy-to-let property.
And if you look carefully, you can also count on a rental guarantee.
Turnkey rental property including management and rental guarantee
More hands-free investment in real estate and acquiring full ownership is not possible.
You acquire full ownership of a rental property that can be rented out immediately.
In addition, you can count on a worry-free rental guarantee, which in practice means that you will receive your monthly rental income.
Investing in real estate with a rental guarantee means that you will not have to deal with vacancy, non-payment, damage and so on.
In other words, the developer acts as a steward himself or through a third party and also offers guaranteed income.
The specific details of guaranteed income always vary by provider, by type of property, by location, and so on.
Offers of hands-off investing in rental properties
Brussels as an investment location
- Buy-to-let property for sale in Brussels in a real high-value location: with 5-6% return per year, starting at EUR 100,000 equity. Brussels investment property can be bought here in a beautiful location in Woluwe
- Buy a flat in Brussels as an investment [AVAILABLE SOON] – In a newly built residence with passive features, such as a carefree rental service from A to Z, from 85 000 euro equity, investing in real estate in Brussels is possible via this investment opportunity
- Value investing in real estate in the capital of Belgium is absolutely possible (fans of defensive real estate investing will also find something to their liking here)
Buy a holiday home in France for mixed use (private + carefree rental)
This hands-off investment in French real estate concerns a mixed-use buy-to-let property in the Wyndham luxury resort in the Limousin region.
You can acquire full ownership of a studio or flat starting at EUR 42,500 and enjoying the following return conditions:
- Guaranteed rental yield of up to 8% per annum calculated on the purchase value of the buy-to-let property.
- The guaranteed rental income runs for a period of 11 years.
- As the owner, you can make free personal use of your property 2 weeks a year, both in the high and low seasons.
- Optionally, you can also invoke a resale guarantee: A guaranteed surplus value of at least 25% when sold after 5 years or of at least 50% when sold after 10 years.
Recreational real estate as an investment formula in France
- Investing is possible from 17 230 euro via this offer recreational real estate as investment formula
- Increasing returns up to 8% per year (investment horizon 11 years maximum)
- Two optional resale guarantees apply:
- Sell at minimum 125% of original purchase value after 5 years
- Sell at minimum 150% of original purchase value after 10 years
German investment property including guaranteed rental income
The German economy is considered the engine and backbone of the European Union.
It is a country where stability prevails in industry as well as in the residential property market.
Do you believe in the future of the German economy and real estate on German soil, for example in the flourishing North Rhine-Westphalia?
Then you can consider acquiring full ownership of a German real estate as investment, including stewardship and including guaranteed rental income.
From +/- EUR 50,000 in equity, you can acquire full ownership of such a buy-to-let property without even having to borrow money.
These are therefore low-threshold investment properties in Germany with which you can achieve a secure, carefree and decent annual return on your funds.
Also take a look at the offer of real estate in Germany, where you can already invest with 35 000 Euros of your own funds in combination with a small loan.
Larger investors also come into their own with this flat block for sale in Germany with income guarantee, trustee and professional management can be a real added value to a property portfolio.
Rented property with all-inclusive rental service in Sweden
- Invest in Swedish rental properties [AVAILABLE SOON]: With an English-speaking steward on the spot and already rented out, direct return on your invested capital, single rental properties
Mixed-use recreational property in Spain
- Holiday flats on the Costa del Sol [AVAILABLE SOON] for sale – with a guaranteed 3 year rental return and interesting conditions for own use (located on a golf resort close to the sea)
Samos (luxury mixed-use holiday property in Greece)
- Buying a second home on Samos, a beautiful island of Greece. Luxury resort built on a hillside in a beautiful bay, choice of property types (new construction). Unique combination of secure rental yield and free personal use
Rental properties and private use in Montenegro
This Montenegrin luxury property for sale [AVAILABLE SOON] in the form of studios or flats is in a unique prime location with options for purely personal use or for mixed use.
In the latter case, you can expect an attractive gross rental yield of up to 9% per annum (these are projected yields that are not contractually guaranteed).
Investment properties in the United States with guaranteed returns
- House for sale in America [AVAILABLE SOON] as a buy-to-let property in Philadelphia – You will acquire full ownership from +/- 84.250 Euros. This property for rent comes with a contractual rental guarantee and an annual net return in excess of 10% if you partly finance with debt capital.
- Buying a house in the USA as an investment property in Baltimore, Maryland – with rental guarantee and local financing is also available (minimum equity is +/- 37.500 Euros. 11 to 13% return if you use financial leverage)
- Apartment complex for sale as investment [AVAILABLE SOON] in the United States of America – Sale Price: +/- 1,335,000 Euros (50% to be financed via local lender) – Comes with contractually guaranteed rental income, completely passive, full English-speaking guidance
TIP: Determine how much your time is worth before investing in rental properties
Both options of investing in rental properties (hands-on and hands-off) offer advantages and disadvantages.
In the ideal scenario, you let your choice depend on your personal lifestyle and vision.
A decent return from real estate is one thing, but a pleasant work/life balance is at least as important.
If you lead a busy life, it may be interesting to approach things rationally.
Investing efficiently in real estate and making money from renting out real estate through the hands-free route may then be the best strategy.
In the end, it always comes down to the following important question:
How much is your free time and energy worth?
Are you a control freak and can you afford to manage everything yourself and do chores?
And would you really enjoy an active role as a landlord? Then the hands-on track of investing in rental properties is the best solution.
In any other situation, such as a busy job and a rich family life, it is better to choose the management route through a professional manager.
The page active property landlords versus passive property investors also deals with this subject in depth.
And if you still have doubts, read active or passive real estate investing [AVAILABLE SOON] for an overview of all the pros and cons of these investment techniques.
And if you do not want any hassle, stress and delays in the purchase process either, then you should opt for turnkey investment properties that can be rented out immediately.
Read more about it on Invest in rental property with rental guarantee as well as on Buy property in rental property [AVAILABLE SOON]: Tips and advice.
TIP II: Beware of special ownership structures
The golden rule in investing in real estate: Acquire full ownership.
This is the only way to be in charge of your own buy-to-let property.
Avoid developers who offer investment properties through a long lease or building rights construction.
In such a scenario, you have too little say and also have to pay an annual fee for the land, often without being sure of good occupancy rates.
To sum up: Look for ready-made investment properties in full ownership.
Preferably in combination with guaranteed rental income from the developer.
So choose to invest in real estate with rental guarantees without the risk of vacancy or default.
TIP III: Focus on incoming cash flows rather than on potential added value
Investing in rental properties is best done with a rational, objective approach to the facts.
This means that you only take into account your annual rental income to calculate the annual return on your invested equity.
So you make an abstraction of a possible surplus value later on when the buy-to-let property is sold.
Such a capital gain at a later sale is speculative in nature and is never a certainty.
So it is best not to take it into account during the simulations and calculations of your financial plan.
The ideal scenario for building up additional passive income with real estate is one in which your rental income is greater than the monthly repayment of your mortgage loan for the buy-to-let property.
In such a case, your buy-to-let property is cash flow positive.
And that creates more financial breathing space and more available leverage to further expand your property portfolio in the long run.
TIP IV: Invest in a diversified portfolio, including assets other than real estate
It is never a good idea to go all-in with one type of investment.
Unless you are a seasoned entrepreneur with a lot of experience, you should not do this.
A healthy spread of your savings and investment portfolio should be a target.
Do you currently have some dormant savings in your savings account and don’t know what to do to activate them and make them pay off?
Then get tons of inspiration from the links below: