If you’re looking to invest in property, there are a few things you should know before taking the leap. Our in-house realtor, Deb Sarsany of the Deb Sarsany Team at The Real Estate Group, is here to help!
The market bouncing back since the recession has encouraged investors to seek out property in the hope of its value rising. Like any investment, buy-to-rent comes with its risks, but for those who have the time and money to do so, in the long run, it can be very worthwhile.
If you’re new to the buy-to-rent market make sure you do your research. Do you understand the risks as well as the benefits? What is the going rent in the area? Is there the potential for rent to increase over time?
If you know someone who has invested in a buy-to-rent property ask him or her about his or her experience. The more knowledge you have and the more research you do, the better the chance your investment pays off.
Make sure you choose a good area of the city to invest in. High demand for housing could lead to increased rental fees and more money in your pocket. Consider choosing a location in a good school district, or near one of our many parks or bike paths, close to the mall or near the highway for commuters. You may even choose to buy a rental close to your existing home – you already know the neighborhood – and you’ll be nearby if any maintenance is required. You need to consider the amount of time this investment could eat up so being close by may be a good solution.
Do the math. What kind of return on your investment do you expect? Don’t forget to factor in maintenance costs. What will happen if the home sits empty for a few months?
Think about the kind of tenant you would like, as this will inform your purchasing decision. If it’s students you’re looking to attract the home needs to be easy to clean and comfortable but not luxurious. If it’s young professionals you want, the home should be modern and stylish, but not overbearing. Finally, if it is a family to attract, your property will require plenty of room for their own belongings. Remember that allowing tenants to make their mark on a property, such as painting and decorating, or adding pictures or photos, or you taking out unwanted furniture will make it feel more like home. As a result, it is more likely these tenants will stay for longer, which is good news for you – and your pocket.
If this is your first buy-to-let purchase don’t be over ambitious. To compare different property's values use their yield. Also, is the purchase a tax efficient decision?
Be competitive when it comes to making an offer on the property. As a buy-to-rent investor, you have the same advantage as a first-time buyer when it comes to negotiating. It pays to know your market when negotiating. If homes are taking longer to sell you will be better able to negotiate. It is also useful to find out why someone is selling and how long have they owned the property. These are all question a good realtor can help you find answers to.
Consider how hands-on you want to be? Buying a property is only the first step. Will you rent it out yourself or get a management company? If you choose a management company you will be charged a fee. On the flipside, the management company will deal with any problems at the property and have a network of plumbers, electricians and other tradesmen to fix a problem, if things go wrong. You could make more by renting the property out yourself but be prepared to give up weekends and evenings on viewings and repairs.
One of the biggest downfalls when it comes to buy-to-rent investment returns is the time when you don't have anyone in the property. Good tenants who want to stay help avoid this - and if they move on they may even recommend your property to someone they know. Keep up with maintenance, make sure your property is a comfortable place to live, and work on and building a good relationship with your tenants.