10 Tips for Buying Your First Rental Property
Posted by Hidcnagpur on July 10th, 2020
Buying a rental property can be fruitful to enjoy a long term return on investment for the future. If you select the property wisely, you can easily enjoy income from the rental property for years. You can also consider income as a supplement to your retirement. So choose your rental property so carefully.
But sometimes this investment can be risky if we are not aware of the market situation and the things that we need to see before being a landlord.
When you’re starting to finding out a rental property, initially it can be a little confusing to know what you’re looking for. You should also be aware how to avoid the most common mistakes while buying a home.
Here you can see the top most important tips for those who are buying their first rental property.
1. Are You Comfortable as a Landlord?
Before making any decision first ask yourself that you are comfortable as a landlord. Because being a landlord need ability like understanding basic renter law, solving the renter issues regarding home repairing, sewage leakage, water issue, and other home maintenance issues.
The landlord has bear this repairing cost and this maintenance & repairing cost can eat your profit. If the landlord has one or two homes for rent or they want to save their money so they have to do all this repairing task themselves.
So, understand the roles and responsibilities of a landlord and accordingly prepared yourself as a landlord.
2. Clear your Personal Debt Before buying a rental property
It is advisable to pay down your Personal Debt Before purchasing a rental property. But it also depends on the situation. If you are paying more interest on your debts than your return on rental investment then it is preferable to pay all debts like unpaid study loans, bank loans, any unpaid bills or children who will soon peruse higher education, so on priority clear you’re all debts
On the other hand, if your return from your rental property is higher than your debt. Then it’s not necessary to clear your debt. Calculate this roughly and then decide your priorities accordingly. There should be a margin of safety.
3. Select property which fits your goals
First of all, you need to make your goals clear while you are hunting for your rental property. Some real estate property you will find better for cash flow, but some others might be cost you a little more to run but it will increase in value as well. If you think to sell it for a more profit in the future, then set your goal that way.
Before setting your goal also consider these things into your account like rental demand, changing property values in the market with time and property location and facilities.
Make sure your rental home should be something that will attract the more renters.
4. Work with a Property Management Company
If yoyo think renters will come automatically without spending any efforts and advertisement, it’s not possible. If you want more renters for your property then you can take help from a property manager. Property managers closely deal with renters, and they have a list of renters with their expectation, preferences, paying capacity, and according to the location
They can help you to attract more renters for your property and with their suggestion, you will find renters more easily.
They can also suggest to you for rent that you can expect from your properties according to the market scenario.
5. Try to Buy a Low-Cost Home
When you are hunting for a rental property than buying a home at a low cost is advisable. Reason being, when you are buying an expensive home than their maintenance and repairing cost will also be higher.
You will be the whole and sole person responsible to bear all maintenance and repair expenses. So calculate all repairing and maintenance expenses according to home. This tips will help you to find your ideal home.
6. Choose a Location near Amenities
This an important aspect to give a priority because this will help you to attract more and more renters to your property. When you are hunting your property then select the location which is close to public transit and amenities.
Safe environment with a low crime rate, and find there should be the availability of amenities, such as parks, stores or malls, restaurants and entertainment options nearby. In addition, also check the growing corporate area which will help you to attract more renters easily.
7. Calculate Operating Expenses
This another important aspect to understand this. The landlord has to bear all maintenance charges. So first you need to calculate your operating expenses.
Operating expenses of your new home be between 35% and 80% of your gross operating income. For more easy calculation, you can implement the 50% rule. If the rent you charge for your home is ,000 per month, expect to have to pay ,500 in total expenses.
8. Talk to the Neighbours
During your property search, talking with the neighbours can be an effective way to know more about the location and neighbourhood.
If you purchase properties near universities then that will be ideal locations because most students will rent for a long time until their study, and their parents also provide personal guarantees on the rent. In this case, you will have more chances to earn more return on your investment.
9. Get Advice from Other Landlords
Finding and keeping good renters is an art. Getting advice from other landlords is one of the easiest ways to understand the roles and responsibilities and how to handle their queries.
The landlord can give you practical advice on what to do and what to avoid. This type of information will help you avoid the mistake and will also reduce the chances to lose your tenant. Being well informed can make you the perfect landlord.
10. Put yourself in the renter’s shoes
The best way to understand about renter’s mind-set, just Put yourself in the renter’s shoes. Once you have finalised your property, then think about what the renting home needs to be an offer to the renters.
You can imagine yourself as a tenant and think about what facilities will be required. For example good kitchen structure and bathroom, water supply, Air conditioning and good heating and parking availability, etc.
If its require then you can also think for home renovation. All this important aspect are considered by the renters so make it available before losing your tenant.
The Bottom-line is that before the jump to the final conclusion for buying rental property clear your all doubt in your mind and set the goal. Calculate your all maintenance charges, interest rate, and also understand the depreciation, etc.
Consider all the above aspects so that your rental property can be a big source form your return on investment.
Before making purchase implement all these tips. Hope this advice can be helpful for you.
Also See: Rental Property, Repairing Cost, Operating Expenses, Top Most, Renters, Rental, Property
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