If you have never bought a property with a mind to renting it out, it is likely that you would consider it to be an easy task. However, in reality, it often isn’t. There are a lot of important factors that you will need to take into account before purchasing real estate for rental, as well as the learning curve that you will encounter on your journey to becoming a landlord.
Here are four important points to consider when purchasing real estate with a view to renting it out.
1. Your budget
First of all, you will have to work out your budget and source a property with this in mind. It will no doubt require that you get additional finance—which you will have to make sure you can afford while you are preparing the property for your tenant and for any gaps when the property will stand empty. Unfortunately, just because you have no rent coming in doesn’t mean that the finance company you choose to use will not want their regular payments to continue.
2. Property location
You may be under the illusion that all properties of a certain type are worth the same amount. Here, you would be wrong. Properties in better locations will have the opportunity to gain better monthly revenues from your tenants.
However, they will also be far more expensive to purchase in the first place. This being said, you do not want to opt for a property that is in a cheap neighborhood. You may find that you cannot find a tenant for it. Also, when it comes to being an investment, it works out to have a poor return for your money.
Ideally, you want to target somewhere in between. This will provide you with a property that you can hopefully afford.
Your potential tenants will also have a neighborhood that they will want to live in. This also means that you will have a property that will be easier to sell when and if the time comes.
3. Additional renovation work
In your budget, you will also have to make provisions for any renovations that will need to be made. Also, that you want to do before you can get your new tenants in.
Of course, renovations are not just about the cost or the finished look of the property. They are also about the amount of additional time that your property will sit empty.
In order to limit this, you will need to find and enlist the services of a contractor who is situated within the local area of your property. So, for instance, if you have a buy to let renovation in Bath your contractor should also be in Bath.
This is so you do not have contractors wasting time by driving all over the place, spending time and money on travel that will no doubt be added to the bottom of your bill. On top of this, when looking to the future, you will have a reliable contractor close to the property. They can be called upon should you require any additional maintenance after the renovation has been completed.
4. Outdoor areas
You should also think very clearly about the outdoor area that surrounds your rental property. Keeping it low maintenance will make it look smart for your potential tenants. It will also reduce your workload when your tenant moves out. Also when the next one moves in.
In saying this, most people like a bit of greenery. So where possible, it is a good idea to keep a lawn rather than getting rid of it altogether.
Plants can also be low maintenance if you make sure that you select the right ones. Some shrubs have flowers that can look pleasing but are likely to need pruning at least once a year. Hiring the services of a gardener to maintain the garden even while you have tenants in situ could be a good idea, but you will have to let your tenants know when to expect them and understand that it is you who will be paying the bill.
A few final thoughts
As you can see, purchasing real estate for rental is not as easy as it may first seem: house and garden maintenance will have to be scheduled and will come out of your pocket rather than your tenants; bills and mortgage loans will have to be paid regardless of whether or not you have a tenant in situ; and these are all points that you will have to take into account when you draw up your budget.
When you are purchasing real estate as your first rental property, you should make sure that you do your research on the area—if you wouldn’t live in the neighborhood yourself, you can’t expect a tenant to either. Speak to the local real estate agents to understand what tenants are looking for and how much they will be likely to pay for a rental, and then seek it out.