Buying a property for the purpose of renting it out can be a great financial decision. It can mean that you will be set to make a profit after making mortgage repayments, and at the same time, you will hopefully be benefiting from a gradual rise in the value of the property.
However, it is important that you take the time to understand the potential risks of investing real estate for rental purposes, and that you are aware of the hurdles you will likely face. The following are some tips to observe when investing in your first rental property.
Even if you have the financial means to do so, starting by purchasing an entire apartment block may not be the wisest choice. By purchasing something simple initially, such as a single-family home, you will be able to learn the ropes. You will then be better equipped to deal with more complex rentals, such as retail investments and apartment buildings, further down the line.
Make sure that you are cash flow positive
It doesn’t matter if you do not have a huge amount of rental profit flowing into your bank account as a result of your initial purchase. However, it is vital to ensure that the rent you are charging is enough to cover all expenses that you are subject to, from the mortgage repayments to basic maintenance of the property. Even if you do not see the profit that you are making, remember that the mortgage repayments are effectively a form of financial gain for you.
If you know the local area of the property that you are investing in well, you will have a much better chance of choosing wisely. You will have a comprehensive knowledge of the types of people that reside in the area, as well as the budget and expectations that they have.
Choose your tenants carefully
Thoroughly screen prospective tenants for criminal backgrounds, eviction history and previous addresses. By doing this, you will minimize the chances of issues in the future.
If you are going through the process of buying your first rental property, make sure that you line up your financing early so you can proceed with confidence.