The rental market is still one of the most lucrative forms of investment for those thinking about dipping their toes into the world of property, and the current situation may be just what potential investors have been waiting for. However, the idea of becoming a landlord or landlady for the first time can be daunting. How do you know if you are making the right decision and which type of property should you invest your hard-earned cash in?
We all know that for a rental property to make a good return, the numbers must add up. You need to ensure that your rental income will cover the running costs, insurance, maintenance, agency fees, and of course, the bond – if you have one. If you can’t cover all of these and make a profit, investing in rental property may not be the right decision for you right now.
What type of property should you be putting your money into?
Much of this depends on your resources and your constraints. Have you got the time, experience, and skills to turn a run-down property into something you can rent out and make a profit on? Or maybe you prefer something that is virtually ready for tenants to move into without any work or delay so that you can go travelling (soon as we can) and leave it to make an income.
It can be rewarding but also costly to renovate a property that requires a lot of work, particularly for the hidden costs that inevitably make themselves known just as the budget is running low. Hidden fees will lead to an increase in expenses to correct the problem and a delay in completing the job. When a tenant needs to move into the property as soon as possible, or you need to start making money immediately, is far from desirable, especially if you have hired contractors to do the work on your behalf.
On paper, buying a property that needs very little work done can seem like the ideal solution. However, their pristine condition usually means they are more expensive to buy.
You’ll also need to consider other things such as the rental prices of neighbouring properties, links to access roads, proximity to local amenities such as hospitals and schools, crime rate, and the general demographic of the local population. By thinking about all of these things before you dive in, you will gain a better idea of the sort of income that you can expect and whether it will provide a large enough yield for your investment.
Whatever option you look at, make sure that you do your due diligence and have all of the numbers to add up before going any further. We recommend seeking some professional advice if you have little or no experience in the rental property market, as its a significant sum of money to gamble with. However, if done correctly, you can soon see a substantial return on your money with minimal effort.
Right now I’m looking at my baby home with gratitude, yet wishing I could step into the buy, renovate, rent field one day too.
** Pics sourced.