Housing is a valuable asset, and if you have the funds, it’s a worthy investment. Many people take the plunge each year to invest in an additional property and become a first-time landlords to generate additional income. Landlords can buy a multifamily, rent out most of the units, then live in one of the units at a lower cost.
Whether you are planning a relocation or you want to use it as your primary source of funds, buying-to-let is completely different from homeownership. Property investment should be approached as a business rather than as a personal affair. The economic uncertainty and the fickle real estate marketing make buy-to-let practices quite risky. Although it is difficult to predict the future trends in this area, here are a couple of tips for the novices.
1. Find Out If You Are A Landlord Material
Forget about the “get rich quick” scheme. Being a landlord is more than just renting a property. You need to deal with different types of people. Some of them will be pleasant, other may be difficult. Can you confront the rogue tenants? In order to be a successful landlord you need to have good social skills, patience, understanding and some confidence. You need to find the balance between being too understanding and too rigid. If this is not you, then you may reconsider your decision.
Of course, landlords have the opportunity to screen tenants and review applications. Knowing how to complete this process thoroughly can save a headache down the line.
2. Know Your Market
Before taking any major actions as a first-time landlord, you must research the market you plan to enter. It does not matter if it’s a hectic spot like New York City, or the small town you grew up in. You’ll need to spend time understanding the risks and benefits in the area. Your money may perform better in another sector. Knowing your market will help you choose the right type of property for your specific area. Think from the point of view of a potential tenant. Pick a place with local amenities and good transport links.
Find out what are the most preferred neighborhoods for renting. The key is to much the type of property you can afford with the locations in which people want to live there. You can consider hiring an experienced agent.
3. Do The Math
Buying a property is a costly investment, especially as a first-time landlord. Before looking for an estate, you need to evaluate your finances. What type of property you can afford and what rent can you get for it? In most of the cases you will need a loan to fund your investment. If you are not familiar with the mortgage rates, it is better to consult with a professional. Usually the rent should cover 125% mortgage repayments. Don’t forget to include the maintenance costs in your estimation. Consider also you loss if the property stays empty for month or two.
When you go for your mortgage, don’t simply go in the bank and ask for it. Ask the advice of an independent broker. They can walk you through the details and help you find the right option for you.
Editor’s Note: We updated this article to enhance readability.
