Useful tips for buying properties for earning rental income
March 18th, 2017
Real estate has been a popular investment choice and it has paid off handsomely for many people. Real estate investments can provide you with both capital and income gains.
However, it is important that one goes with eyes wide open while buying a property for rental income—acknowledging the potential advantages and disadvantages. Before finalizing the property, it is advised that you do a thorough research to know the pitfalls.
The more prepared you are and the more knowledge you have about the property, the better the chances of your investment paying off. Here are a few tips to help you zero in on the right property to trust your money with.
Choose a promising area to invest
A promising locality is a place where people would like to live for various reasons. It may not be the cheapest. Identify places that have special appeals. Regions that are easy to commute to with good public transport system and where there are good schools and colleges. Such places are always appealing to young families that form a large chunk of your to-be clients.
You also need to find properties that you can afford. In most cases people tend to invest in properties closer to where they live. On the plus side, they are likely to know this market better than anywhere else and can spot the kind of property and location that will do well. They also have a much better chance of keeping tabs on the property. However, there are times when your town is not your best bet.
Cast your net wider and look at towns with good commuting links that are popular with families.
It is also worth looking at properties that need improvement as a way of boosting the value of your investment. Tired properties or those in need of renovation can be negotiated hard on to get at a better price and then spruced up to add value.
Think about the to-be tenant
Empathize with your tenant. Instead of thinking whether you would like to live in a property, put yourself in the shoes of your target tenant. What are they looking for in a rented house? If they are students, the house needs be clean and not too luxurious. If they are working professionals, it must be close to their office, modern and affordable. If it is a family, they will have plenty of their own belongings and need a blank canvas
You have to critically analyze your mortgage rates and likely rental amounts before zeroing in on the property. You must take into consideration the maintenance costs and have to think about situations in which your property sits empty for a few months.
It pays to speak to a good independent broker when looking for a buy-to-let property. They can not only lead you to available deals but can also help you weigh up the right one for you.
As a buy-to-let investor you have the same advantage as a first-time buyer when it comes to negotiating a discount. If you are not reliant on selling a property to buy another, then you are not part of a chain and represent less of a risk of a sale falling through. This can be a major asset when negotiating a discount. Make low offers and do not get talked into overpaying.
Master the art of negotiating
It pays to know your market when negotiating. For example, if the homes are taking longer to sell, you will be better able to negotiate. It is also useful to find out why someone is selling.
An existing landlord who has owned a property for a long time may be more willing to accept a lower offer for a quick sale than a family that needs the best possible price in order to afford a move.
Before you make any investment you should always investigate the negative aspects as well as the positive. 1