Buying a property to rent is a great way to earn some extra money on the side. Your tenants will provide you with a continual stream of passive income each month, and all you have to do is keep the property suitably maintained. Your buy-to-let property is a valuable asset that will likely undergo significant capital appreciation over time, so if and when you are ready to sell, you stand to make a tidy profit.
There are huge advantages to owning real estate, but if you’re new to the property game, it can be difficult to know where to start. There are so many properties out there, and you need to find the right one that will guarantee you a solid return.
To help you on your journey to becoming a landlord, here are four tips for buying a rental property.
Organize your finances
Properties are expensive, so you need to stick to what you can afford. Conduct an audit of your finances and work out how you can reasonably spend. Unless you can pay outright, you will need to take out a mortgage, so it’s worth visiting with a mortgage advisor who can give you more insight into your options. Getting a loan for a rental property is a good option to help you finance the acquisition. It can take a number of years before your rental income turns into a profit, so you need to be organized with your finances from the outset.
Choose the right location
The location is key when it comes to picking profitable rental property. You want to find a place that is up-and-coming, in which property value is likely to increase in the near future. This will enable you to purchase at an affordable price while benefiting hugely from capital appreciation. These locations will also be enormously attractive to prospective tenants, so you should have no trouble finding people to live in your rental property.
Screen your tenants
Although most tenants are no trouble at all, there are a few bad eggs. People who will neglect your property or fail to pay their rent on time. These troublesome tenants can waste a lot of your time and money, so it’s prudent to screen them before you sign a contract. It’s standard practice to conduct background checks to ensure there are no criminal records, as well as ensuring they are financially capable of affording their rent. But you should also make a point of meeting them and getting to know them. Your first impressions will usually tell you everything you need to know about how trustworthy they are.
Know the risks
Although real estate is one of the more reliable investments out there, it’s important to note that it does still come with some element of risk. House prices have been trending upwards in recent years, but that doesn’t mean they can’t slump at any moment. Will you still be able to afford your investment if property prices take a tumble? There is also the chance that you’ll need to fork out for costly repairs, for example if a boiler explodes or the house is susceptible to subsidence. Make sure you are prepared for anything, and be sensible with your investment.