Buying a rental property is a big decision. It can be a great way to make money, but there are things you need to check first. This guide will help you know what to look for before you buy.
The Area and Neighborhood
When buying a rental property, the area and neighbourhood are very important. You want a place where people like to live. Good neighbourhoods usually have jobs, schools, and shops nearby. But be careful with cheap areas. They might have problems like crime and poor transportation links.
This can make it hard to find good tenants and get good rent. Some areas look good but check them carefully. Make sure the neighbourhood is safe and has things people need. If you choose the right area, your property will be more popular. This means you can ask for higher rent and have less trouble finding tenants.
The Property’s Condition
The condition of the property is key. Before buying, check if it needs fixing. If it does, work out how much it will cost. This includes big and small repairs.
Also, look at past fixes. Make sure they were done right. If they weren’t, you might have to spend a lot to put things right.
You might want to get a measured building survey, especially from a company that uses 3D modelling, to get an accurate representation of the buildings’ condition. This is because precision 3D scanning uses cutting edge, high-definition laser scanning technology to capture and record millions of discrete data points, giving a deep-dive into every nook and cranny of the property.
The Costs of Running the Property
- Repairs and Maintenance: Think about costs like fixing things and looking after the property. This can be things like a broken heater or a leaking roof. Plan for these costs so they don’t surprise you later.
- Gardening and Pest Control: If the property has a garden, it might need work. Also, you should deal with pests like mice or bugs. These things cost money, so keep them in mind.
- Insurance and HOA Fees: You need insurance for the property. This protects you if something goes wrong. Also, if there’s a Homeowner Association (HOA), you might have to pay fees. Check these costs before you buy.
- Property Management: If you don’t live nearby, you might need someone to look after the property. This person can handle things like finding tenants and fixing problems. They charge for this, so think about if you need services like these.
The Rent You Can Get
When you buy a rental property, think about the rent you can ask for. Look at other properties nearby. See what they charge for rent. This gives you an idea of what people are willing to pay. You want to make sure the rent covers your costs.
This includes things like the mortgage, repairs, and any other costs. The rent should also give you some profit. This is why you’re renting out the property. In good areas, you can often ask for higher rent. But, in cheaper areas, the rent might be lower. Make sure the rent makes sense for the area and the property.
Documentation
Documentation is very important when you buy a rental property. There are many laws you need to know. This includes how to handle deposits and when you can tell someone to leave. Make sure you understand these laws and protect yourself with the right documents. If you don’t, you could have big problems.
Also, think about things like your lease. The lease should be clear and cover everything. This protects you and your tenants. If you’re not sure, get help from someone who knows about these laws. This way, you can be sure you’re doing things right. It’s better to be safe than sorry when it comes to legal stuff.
Finding Good Tenants
- Background Checks: When you find people who want to rent your property, check their background. This means looking at their past renting history and if they have a criminal record. This helps you know if they’re good people to rent to.
- Income and Employment: Make sure your tenants can pay the rent. Check their job and how much they earn. This is important because you need the rent to pay for the property’s costs.
- Past Renting History: Look at where they lived before. See if they were good tenants. You can ask their past landlords. This gives you an idea of how they will treat your property.
Conclusion
Buying a rental property can be a good investment. But you need to do your homework first. Check these six things before you buy. This will help you make a good choice and avoid problems later on.
