Guide to buying an investment property to rent.
- August 16, 2019
- Posted by: admin
- Category: Real Estate
Investing in Real Estate properties is one strategic way to create wealth and not end up working when your old feeble hands should be resting. So, if you are considering buying a property, to be the next landlord in your area, you are doing the right thing by reading this. I know you want to skip formalities and jump to “level pro” but consider this as investing in rental property for beginners. Good thing is, this article is just what you need. So, here is a simple guide to buying an investment property to rent.
The first thing you need if not the most important when considering investing in real estate properties is the choice of location. The location you choose to invest will go a long way to either determine if you make loss or profit, both on short and long runs. The location in which you have chosen determines the type of tenants you attract and the vacancy rate you charge. For instance, if you have an investment property to rent in Lekki and Mushin, the type of tenants for both locations will be different and the vacancy rates will also differ.
The location of your real estate property depends on other factors which will also either make or mar your investment. What is the area’s proximity to the market, what are the prominent businesses in and around the area, what is the future growth rate of the area? These are some of the questions you should have answers to before making payments for a property and would prove important as a rental property investment strategy.
If you are considering a family-sized accommodation, you want to ensure you have properties to accommodate families and not bachelors. The quality of local educational facilities in the area also needs to be carefully examined. If a property is good, but the nearby schools are poor or non-existent, it can affect the value of your investment. Another instance is knowing the kind of property to buy for a student populated area even though you will have fairly regular vacancies as regards new sessions which also equates to income, but you don’t want to run a loss by having to repair damages every now and then with your profits.
Inasmuch as the goal is getting people to rent your properties, you then must consider what benefits lie in for the prospective tenant too. Are there necessary social amenities like water, good roads that lead in and out of the area? Check the potential location for current or projected parks, malls, gyms, movie theatres, public transport hubs and all the other perks that attract renters. Cities, and sometimes even particular areas of a city, have loads of promotional literature that will give you an idea of where the best blend of public amenities and private property can be found. This is also a good start on how to determine a good rental property.
The aim as earlier highlighted is to make a profit and to do that is through rental income. It is better put as the bread and butter for your rental property investment. Knowing the average rent the tenants in the area pay will give you an idea of what to charge. You don’t want to be charging either too low or high. If charging the average rent is not going to be enough to cover your mortgage payment, taxes, and other expenses, then you have to keep looking. Be sure to research the area well enough to gauge where the area will be headed in the next five years. If you can afford the area now, but major improvements are in store and property taxes are expected to increase, then what could be affordable today may mean bankruptcy later.
Obviously, no one would love to rent an apartment in an area where the crime rate is high. This is also another important rental property advice to consider when deciding the kind of property, you want to invest in. A visit to the Police station for accurate crime statistics or a careful observation of the area. Getting familiar with residents of the area is another way to get the information needed. Items to look for are vandalism rates, serious crimes, petty crimes and recent activities. You might also want to ask about the frequency of a police presence in your neighbourhood.
NUMBER OF VACANCIES
When a particular area has a high number of vacancies, this can either be a bad or good sign. As a potential real estate investor, you must ensure to find out which. Is it that people are leaving the area or is it a new place with potentials for future growth? You should also determine whether you can cover for any seasonal fluctuations in vacancies. The vacancy rates also give you an idea of how successful you will be at attracting tenants. High vacancy rates force landlords to lower rents in order to attract tenants. Low vacancy rates allow landlords to raise rental rates.