Owning your first rental property can become a lucrative stream of revenue if you are able to do so. Monthly income from rental properties can cover your own mortgage. It allows you to reap the financial rewards for very little effort.
And with the rise in artificially inflating the value of properties in the area due to scarcity, you can rely on the value of your investment increasing over time.
Through both passive income and capital gains, you can see why buying your first rental property only to rent it out is such an attractive proposition.
To walk you through some of the concerns you might have about the process, we’ve collated a list of helpful tips and tricks.
You’re a long way away from being able to manage an entire residential block. But this piece will give you a solid understanding of the things you need to consider before buying your first rental property.
Understand the Risks of Your First Rental Property
If you’ve overheard someone bragging about the amount of money their property portfolio makes them, it might seem like becoming a landlord is a can’t miss business opportunity. The reality, however, is much different. You’re only ever likely to hear about people’s successes.
What you’re less likely to hear is their list of failures. Not everyone can succeed in their first rental property market. Understand that you run the risk of losing money. You may find yourself in a financial hole is a very tangible possibility.
You have to be extremely selective with any addition to your portfolio.
Choose the Right Area
Emerging areas that are destined to grow in popularity can be the best way to turn a profit on your investment.
They can still be laden with risk. Just because there are a few trendy bars and restaurants opening in that area, it doesn’t necessarily mean that it will continue to blossom.
Many an investment opportunity has been spoiled by false promises of a location on the rise.
And you still have to focus on your main priority: collecting rent. You have to weigh this concern against the probability of your property accruing value over time. There has to be a demand for rented accommodation in the area you are considering buying a property.
Students represent a massive proportion of the renting community. So you’ll have to think about some of their priorities. Things such as proximity to the university, a selection of pubs, bars, and clubs as well as somewhere to get food.
If your first rental property fits into this bracket – and you’re hoping to attract students to your property – this might be a good match.
Look for Opportunities
There may very well be government incentives that benefit landlords at the time you are looking into purchasing. Keep an eye out for the opening date and closing date for any of these schemes. They may well disrupt or enhance the strength of your position.
The stamp duty tax is one such example. Up until 30th June 2021, you’ll have the opportunity to purchase your first rental property under the value of £500,000 without paying any stamp duty tax.
Final Thoughts on Your First Rental Property
Speak to as many people as possible. Don’t be sold on the dreams of one over-eager investor. Take the time to investigate your options. Research the state of the market and take control of any variables that have the potential to disrupt your plans for the future.