Are you interested in purchasing a rental real estate? Investing in such property may prove to be burdensome for individuals who lack both time and patience to cope with the everyday challenges of property management.
Some people hire the assistance of professional real estate managers to handle the mundane tasks of rent collection and communication with lessees. Since hiring such services adds an extra cost to the monthly expenses, most landlords decide to take care of the management tasks on their own.
If you’re willing to take the role of a lessor, the following tips will teach you how to invest your money in rental real estate.
Consider your property management abilities
Being a landlord is considerably more demanding when compared to the other methods of real estate investment. Unlike REITs and house flipping opportunities, becoming an owner of a buy-to-let property is a full-time job, requiring round-the-clock attention on the part of landlords. Click here to learn more about the various roles a landlord is required to take.
In addition, lessors are expected to spare enough time for daily communication with the tenants, repair and maintenance tasks, collecting rent, and supervising the premises. If you already have a lot on your plate, make sure you hire a reputable property manager to take care of all obligations on your behalf.
Another important factor to consider when investing in a rental property is financing, as you’ll need to apply for a buy-to-let mortgage. The eligibility criteria for these loans differ from residential mortgages, requiring investors to fulfill a multitude of income requirements. When applying for such a loan, banks calculate your potential rental income in order to compare it with your financial ability to pay the debt off.
Prior to investing in a buy-to-let real estate, prospective landlords are required to have some cash reserves in the event of unpredicted issues. For instance, some of your lessees might fail to pay rent due to a number of financial problems or you’ll be faced with unexpected repair costs that have to be paid in order to fix a certain defect. Also, you’d need extra money to cover the maintenance costs during the vacancy period, when no tenants reside in the apartment.
Choose the right rental property
In order to purchase the right buy-to-let real estate, aspiring landlords are encouraged to conduct in-depth research on the rental market. The ideal market is supposed to consist of individuals who cannot afford to purchase their own homes or aren’t eligible for residential mortgages. Additionally, areas with housing shortage are considered as beneficial for buy-to-let investors as well. The following link, https://www.investopedia.com/articles/mortgages-real-estate/08/buy-rental-property.asp, explains the most important features of profitable rental properties.
At the beginning of your journey as a real estate investor, you’re strongly advised to start investing in small, residential estates, not commercial ones. Make sure you purchase a suitable family home to rent out until you get used to the wide range of lessor requirements.
Bear in mind that investing in commercial real estate is a big step for a newbie, despite the great likelihood of earning higher profits. Buy-to-let mortgages for commercial properties require a minimum of 30 percent deposit to be considered as eligible for such a loan, which is too much for a beginner.
Pick the right location
The location is of essential importance when purchasing a rental property, as it directly affects the interest of potential tenants in renting the place out. Also, selecting a good location is one of the main factors that contribute to charging high rental rates, as nobody would be willing to pay a high price for rent in a bad neighborhood.
Therefore, it’s paramount to choose a residential area with reputable schools, low crime, and plenty of amenities. You can hire the services of a consulting agency, such as Thirlmere Deacon , which specializes in providing property investment advice to prospective buy-to-let investors. Such professionals will help you choose an area that fits the necessary requirements, as their job is to help clients purchase a profitable rental real estate.
Being a landlord is a demanding, but lucrative investment opportunity.
It’s worth the chance!