There are a lot of things to think about before you invest in a rental property, it’s not all about how much money you will make.
Though you should only invest if you think it’s a worthwhile endeavour financially, there’s actually a lot more to consider than just that.
Here are three of the key things to think about before signing the papers.
Will You Make Any Money?
A lot of people make the mistake of assuming that any real estate investment is a good investment, but that’s not always the case.
Though most properties do appreciate in value over time, this isn’t a guarantee. As you don’t want to lose money as part of your investment, think about your finances before going ahead.
A lot depends on the real estate market and though you can’t control this, you do need to consider the likelihood of making money further down the line. If there are too many properties on the market, you could lose money when it’s time to sell.
You need to think about the amount of money you will be spending on the property, as well as the amount of money you will be spending on repairs and maintenance.
Some properties will need renovations before they are ready to rent to tenants, which can be costly. After buying the property, it could be many months before you see a boost in your income.
Therefore, you need to have enough money saved ahead of time to cover costs.
What’s the condition of the property?
The condition of the property is certainly something to consider before going ahead and investing, as this could hugely impact the amount of work and money that you need to put into renting it out.
It’s difficult to find a property in perfect condition, but avoid taking on more than you can handle. If a property needs a lot of work doing this will take time and money, which you may not have readily available. Termites, pests, mold, mildew, structural issues and water damage are all things to look out for.
If you are worried about the condition of a property, hire a home inspector. They will be able to highlight any dangers and potential problems, many of which may be the seller’s responsibility to fix before selling to you.
With this information, you will be able to weigh up whether the property is a good long term investment. You don’t want to run the risk of choosing a property that’s going to cost you a lot in repairs, renovations and maintenance before you manage to turn a profit.
Are You Capable of Managing a Property?
A lot of people underestimate the workload that goes into managing a property, finding himself overwhelmed and stressed with being a landlord shortly after making the investment.
Luckily, there are property management companies available to help landlords out. Though you will have to pay the company a percentage of your rental income, it does free up a lot of your time.
A property management company will handle the day to day running of the property, as well as dealing with rent and tenant requests. If you are able to afford to hire assistance, it’s definitely something worth considering.
Once you have found a property, are financially viable and understand the job of a landlord it’s time to make the investment.
Don’t rush into making an investment unless you are completely happy with the property, great properties are put on the market regularly.