Summary: Rental properties also require hands-on management, but unlike house flips, they have a long-term investment horizon. Any type of property (residential, commercial, or industrial) can be a rental property.
Property owners earn regular cash flow usually on a monthly basis in the form of rent payment from tenants. This can provide a steady, reliable income stream for investors, but it also requires a lot of work or delegation to ensure that operations are running smoothly.
First, you must find tenants for your property. This may be easy or difficult depending on your property type and available resources for finding tenants. You are also responsible for performing background checks for prospective tenants and providing sound lease agreement contracts with tenants. For each month that you do not have a tenant, you miss out on income from your investment
Once you have tenants, you have a litany of resultant duties. As the landlord, you are responsible for rent collection, property maintenance, repairs, emergencies, evictions, and record-keeping for the properties. Depending on the number of rental properties that you own, property management can be a part-time or full-time job.
Some real estate investors who don’t want to handle the management of the property contract a property management company for a fixed or percentage fee. This takes some weight off an investor’s shoulders, transforming the real estate into a more passive investment. However, this trade-off also means that they cede some control of their properties and lose a portion of their monthly income.