Real estate investing manifests itself as an exceptional way to build wealth and achieve financial independence. In spite of this, a leading question playing on the minds of many prospective investors is, how much do real estate investors make a year. Different factors come into play when determining the answer to that question. Still, in this article, we will explore some of the factors that can impact real estate investor income and provide pro tips on maximizing rental income.
Factors that Impact Investor Income
When looking at the average investor income, several determinants can create an effect. These include:
- Location – the location of a rental property can bring about a significant change in its income potential. Properties in high-demand areas, just like properties in the vicinity of quality schools, transportation connections, and amenities, commonly indicate higher rental incomes.
- Type of Property – whether a single-family rental property or an apartment building can also affect potential income. Single-family properties are easier to rent and maintain, often generating higher rental returns than apartments.
- Investment Size – the size of the investment is also essential when it comes to predicting income. The more properties a rental property owner owns, the higher their chance of generating meaningful rental income.
- Market Conditions – market conditions around a rental property can also affect income potential. Rents have a tendency to be higher in places where there is a strong demand, whereas the contrary is true in locations where there is a lesser demand.
- Management Style – managing a rental property can also affect profits. Self-management may seem more cost-effective at first, but the truth is that hiring a professional management company can greatly reduce headaches and improve returns.
- Investor Experience and Knowledge – an investor’s experience and knowledge can significantly impact their earning potential. Experienced investors with a sustained engagement in the area and who have established a strong network and understanding of the market tend to do better than those who are not involved in investor communities and education. Continuing education and being current on industry developments may also assist investors in staying ahead of the game.
Average Investor Income
According to national data, the average income for real estate investors in the United States is about $140,000 annually. Of course, that number varies widely from state to state and even from market to market. For example, the average real estate investor income in North Carolina is about $107,000, while in New York, it is $161,000. Each state’s investor income can range from hundreds of dollars to well above average.
For single-family rental property owners, you can use several helpful metrics to determine your rental income depending on the type and quantity of properties you own. For example, the 1% rule is a way to determine target rental income. This rule says that the amount grossed through monthly rent should be at least 1% of the final property purchase price. For example, a $200,000 property should rent for at least $2,000 monthly. You would then need to deduct monthly expenses to calculate the expected net profit.
Maximizing Rental Income
Once you’ve reached a competent level of understanding regarding the factors that influence real estate income, several pro tips help maximize your rental property profits.
- Do your due diligence and research the rental market in your area. Knowing the going rates for rent and expenses assists an investor in determining the best investment strategies for your market.
- Price your rental property correctly. Your rental rate should at least cover all property expenses, including mortgage payments, taxes, insurance, and maintenance. To generate income, your rate will need to exceed your costs.
- Invest in single-family rental property. This can be an excellent way for investors to build long-term wealth and achieve financial independence. Single-family rentals provide consistent cash flow and benefit from appreciation over time.
- It is important to remember that rental property ownership requires diligence and hard work. Rental property owners should always be open to learning new skills and strategies to maximize their income.
Contact Real Property Management Acadia to learn more about earning a passive income and achieving financial freedom through real estate investments in Hampden and the surrounding area. Our experts can offer competent and approachable advice on property management and real estate investment matters. Call us at 207-561-7482.
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