Investing in Rental Property for Beginners – Things to Consider
Posted by: Rebecca
Sep 25, 2015
Buying a rental property could be more challenging than a buying a home for yourself as here you not just want a lovely accommodation but also profits! Your chosen property should attract long term tenants and must command rent that helps you pay for the taxes, maintenance, mortgage and still make some profit. Searching smartly is the key to find a profitable rental property and here we offer some tips to help you make a wise investment decision.
Search, Search and Search
Believe in the fact that there are always nice locations and properties that are really worth the investment so do not give up till you have found a property that meets your criterion. Hiring property consultants is good but do not rely entirely on them. Do search on your own so you know the property market well. Do not succumb to the pressure of your property consultant or get carried away with their glib talks as they are always in a hurry to get the deal fixed. Use your own judgement when making a decision.
Location, Location, Location
When buying a property, three things matter the most – location, location and location. And, when you are buying a rental property, the importance of a good location cannot be emphasized enough.
- Your property should not be in an area where the crime rate is high. Nobody prefers such areas. Here are some ways to know if you have picked safe neighborhood or not.
- Presence of a good school in vicinity increases the worth of the property. And this is a proven fact that school locations really affect home prices. This post will make you understand how and why – The Impact of School Locations on Home Prices
- If you buying a property close to employment opportunities you will find it easy to get tenants whom you can rely for timely rental payments. People always prefer an accommodation close to their work as it saves them time and commuting expenses.
- If your property is close to a University, you can expect a steady pool of short term tenants.
- Locations that offer amenities such as parks, gyms, malls, theatres and good public transport too attract tenants.
Prospects of Rents
When buying a rental property you need to gauge the rent prospects of the property and how much rent you can attract.
- Check out rental property listings for the location. If there is an unusually high demand it could be a seasonal demand or perhaps it could signal a warning to you that everything is not okay. If it is a seasonal demand you have to see if you could afford the annual vacancy period. High amount of listing also depict tough competition and this mean the landlords may be forced to lower the rents to grab tenants.
- What are the average rents in the locality? Will this average rent be sufficient for you to take care of the mortgage, insurance, maintenance and taxes? If not, then this may not be right property for you. A better idea would be to search more.
- Visit the municipal planning depart to find out what new developments are coming up or zoned for your chosen location. If there are malls, parks or condos coming up in the area it is good growth area. Also, determine if the planned developments will hurt your rental prospects. For instance, if there is a loss of green cover or if there are lots of condos and housings coming up in the area, it could hurt your prospects because of tough competition in rental properties.
Searching for a rental property should not be taken lightly. You should be realistic in your approach and even if you think you know it all, it still makes sense to take advise of a professional property consultant. Besides, you need to ensure that your financial condition is sound. It is quite possible that your rental property will not start generating rent immediately. You should have enough finances to take care of this initial vacancy period.
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