Tip: One of the smartest decisions is to invest in property to rent first, and then use the income to save up towards buying your dream home over a period of time. This is what the wealthiest people in the world do for fun.
So we have summarised the following pointers to get you going on your property journey.
Use this to help to work out a profitable deal when buying an investment property to rent.
1) Mortgage-related requirements
Investment related properties are often considered to be riskier since they’re not ordinary residential types of properties.
The insurance and mortgage rates can be higher as compared to residential properties.
You might be asked to pay about one and a half percent more rate of interest in case of investment properties.
The down payment needed to buy an investment unit is also significantly higher – at about fifteen to twenty-five percent more.
It may further increase if you are planning to buy more units.
2) Property taxes levied
Depending upon the location in which you are buying an investment property to rent, the property taxes can add up to the costs.
Therefore, before you plan to buy an investment properly, ensure you get in contact with the civil government first.
In addition, look into the local the taxation pattern levied upon the accommodation you are planning to buy.
3) Homeowners insurance
Property buyers are required to pay a certain insurance amount on their properties.
Each area has a different insurance premium attached to it.
If the location is prone to flooding, fires, or other cases, which can influence the long-term or sustained use of their property, it might invite higher premiums.
The neighborhood too plays an important factor in deciding the premium.
In summary, the affluent and wealthy neighbourhood might attract higher premiums.
4) Maintenance costs
How expensive is it to maintain your property?
Maintenance costs can add to your property buying value.
There are always improvements to be made when buying an investment property to rent.
Therefore, account for repairs by calculating rent at a higher rate to compensate for any maintenance amounts.
Note, this can make your leasing or selling more difficult.
5) Association fees and ground rent
Many apartments, as well as homeowners associations, charge a monthly fee on your premises.
Association fees need to be included in your purchasing budget.
Failure to pay these fees may result in many types of financial troubles, including litigations.
So you ought to check out how much the ground rent or management fees cost each month.
Offering several types of amenities or utilities can cost money.
Gas and electricity connections must be covered in time to sustain the amenities.
Utility costs can be paid directly by the tenants.
But if you nclude it then you will attract more potential rentals and save time on searching for tenants or occupiers.
As a result, if your main objective is buying an investment property to rent. you want to have a good location and start marketing for tenants to continuously pay you the rental income.
Quite often, property owners have to spend time and efforts dealing with queries and requests.
Moreover, the law also protects tenants, so you need to check you have all the necessary certification as you grow your property portfolio.
There are some simple things that you can do yourself, or you can get help with credit repair from the Credit Assistance Network.