The idea of becoming a landlord is alluring for quite a few; after all, who doesn’t mind a monthly rental income? However, owning a rental property also means regular maintenance, finding the right tenant and dealing with delayed rental payments. Like any other investment, owning rental property has its pros and cons, however, if you find the right rental property, then the pros will certainly outweigh the cons. If you are thinking about investing in rental properties or becoming a landlord in the near future, then there are some tips to help you find the right rental property.
Do your due research:
Buying an investment property is not just about the resale value, it is about how much money you can make from your investment. So, instead of asking yourself how much is my house worth, you need to find out how much money you can earn from your house. Speak to estate agents, market experts and other property investors to really understand what investing in the property market is all about. You need to be able to understand the local market, you need to know the demand and supply in the region, you should be well-versed with the market conditions and you need to know the demographics. At the end of the day, if you really do your research before you invest in the property market, your investment will be profitable. Keep in mind, factors such as safety, crime statistics, location, neighbourhood, amenities and transport links play a big role in determining the value and worth of a property.
Choose the right property in the right location:
Before looking at potential properties, you need to do your research to figure out the best location to invest in. For instance, if you are looking at neighbourhoods that are in a school district, then you might want to look at homes, as your tenants will most likely be families with young children. If you are looking at properties in the city, then investing in studio apartments might be a good idea as your potential tenants will probably be young professionals. Similarly, if you are looking at rental properties near colleges and universities, consider investing in apartments as your property will attract a high student demand. On the other hand, if you’re thinking about buying a property in a scenic suburb or the countryside, you might want to rent out your property as a holiday home.
Calculate your cash flow:
Before you decide to invest in a rental property, you need to carefully calculate your cash flow. After all, isn’t a good investment one that is cash flow positive? Find out the average monthly rent in the area and then compare that amount with the average monthly expenses. Be sure to include the monthly mortgage, maintenance expenses, taxes and the cost of upkeeping the property when you figure out your monthly expenses. If the monthly rental that you will receive from your rental property is lower than your monthly expenses, then you will just end up spending money from your own pocket. By calculating the cash flow before making an investment, you can ensure that your investment is profitable and cash flow positive.
Understand the local demand:
At the end of the day, you are buying a property to give out on rent, so you need to cater to the local tenant demand. For instance, during the Covid-19 pandemic, properties that had private gardens, balconies and even rooftop terraces were high in demand. Also, properties with additional rooms or a garage were very popular among buyers and tenants as people were looking for some space to create a home office. Rental properties that met these criteria were highly in demand, whereas properties that did not have such facilities were empty. So, as a potential landlord, it is very important to understand the local tenant demand and invest in properties that actually meet these demands. In the past few years, en-suite bathrooms, dedicated parking, high-end kitchen appliances and modern kitchens have become very popular among tenants.
Before investing in any area or neighbourhood, make sure to check out the competition. If there are an unusually high number of rental properties available in that area, then it might mean that the demand for rental properties is low. On the other hand, if there are just a select few properties that are available for rent in the area, that could also mean that the demand is not very high. This will help you choose the right location to invest in; in the property market, the location is everything.
