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What to Consider while Investing in a Rental Property?

13/12/2017

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I strongly believe that buying a rental property (other than the home, you are living in) is one of the best financial moves that one can ever make. It is possible to make money in real estate but there is more to it than just purchasing the first decent home available in the market. Real estate is a tough business and the sector has a number of ditches that can annihilate the returns. Let' s scrutinize the points, you should consider while investing in a rental property.

Condition of the Property

There is nothing wrong with buying a fixer-upper but you need to be realistic about the money and time span, it will take to start making money from the said property. Once you finalize the property, you must hire the services of a qualified professional for a thorough inspection and see how many repairs are there and get estimates. Experts suggest fixing all major issues before renting it out. Repair things as quickly as possible so that your property will not remain vacant for long.

Rental Yield Calculation

Every property buyer has his own goals when it comes to expecting returns from his investment in form of rental property but experts suggest that the income from an investment property needs to follow 1% rule. To meet the figure, you must invest in a property that is located in a rapidly growing and in demand residential society – because home values and subsequently rental amounts can jump significantly there in a short span.

Think about Unexpected Costs

While the primary objective of buying a rental property is to have a stable source of income but you should also be ready to meet unexpected expenses. You should be prepared in advance therefore, calculate the amount it would take to undergo major repairs and replacements such as washroom and kitchen sanitary fittings, geyser, fans and window panes. Keep handsome amount in your savings account as a cushion to meet such expenses.

Property Management

Being a landlord is a rewarding experience but sometimes it can be a headache and you should be prepared for it as well. You can get an unexpected call from your tenant during a beautiful sunny day for a plumbing disaster. And to keep that all at bay, experts suggest hiring a property manager to take care of everything on your behalf. If you only own one rental property, you must manage it yourself and see the matters yourself. Finding a good tenant is also a blessing in disguise so you must try to accommodate them, as it will reduce your maintenance amount.

Becoming a landlord is a great opportunity, but the experts must do their due diligence before taking the plunge.