Important Factors to Consider Before Buying Rental Properties
Purchasing a buy-to-let investment property is not a straightforward undertaking as acquiring your own home. Selecting the right property is among your most crucial tasks as an investor. A poor choice can compromise everything and attract long void periods or yield inadequate return on investment. However with the right decision, success is a guarantee in the buy-to-let market. There are a lot of factors that you need to put into consideration before you carry out anything. Here are a few factors to consider prior to purchase;
There are many elements of location that you need to take into account. What kind of area is the property lactated in? Is it near services and infrastructure such as a bust station? Is there any urban centre around? If not, are its surroundings appealing enough to attract tenants? Is it close to your home? How fast can you get to the property when needed? Unless you are going to entrust the management of the property a hundred per cent to a professional, you want a property that is not situated far away from your dwelling. Also, you need to explore the state of the market in the area. What is the average rental income for other comparable properties? What is the average void period? These factors will have a great impact on your success.
Cost is a serious defining factor in the buy-to-let market. The property’s value determines the size and duration of a mortgage repayment. However, it’s not a guarantee that a more expensive home will attract a higher rental income same way it isn’t a must that a property acquired BMV (below market value) will yield inadequate rental income. The key is working out the balance between cost and the average rental income of the area before you purchase.
Consider Your Targeted Tenants
The property and the area you choose will greatly determine the kind of tenants available to you. If you purchase within a university town, for instance, you might not have long void periods due to large number of student tenants. Also, if you buy a high-end rental apartment, for example, you might have difficulty finding a tenant due to high rent. So before you purchase, consider who your targeted tenants are and most importantly the area. If the area is inhabited by middle or low income households, do not buy a high-end property and vice versa.
Cost of Renovation
Lastly, you need to consider the amount of work which you will have to put into the property especially if it is that you acquired it BMV (below market value).In as much as it is not wrong to select a property such as this with the intention of sprucing it up, you need to think about how much it will cost you to do that and the duration of time it will take. If it will cost much and withdraw you from other profit-generating tasks, you may want to pick another property. This is because the longer you take to renovate it, the longer you will be without any profit and also the more you spend on improvement the more you will add to your expenses.