Rental property has been proven and even recommended since it is a long-term wealthy generator. Below are five tips that will enable one ensure that his/her rental property investment venture is a profitable one.
Know the reason why you are buying
Usually, there are three key factors that most people consider when venturing into this industry: the first reason is; being the owner of the property, to be an income generating venture: last but not least is to purchase for speculative purposes.
For a speculator, time is essential here. You only need to catch up with it when it is on an upswing where you will make good money. According to Precondo, if you stretch financially to buy a condo or any other property when the market prices are at the peak, you are most likely going to make a loss when selling. Therefore, you need to be careful in timing.
Being an investor sometimes is a smarter way of benefiting as a real estate owner. This is all because you are in the deal for a long-term period which will enable you to do more research. This will not only make you familiar with the plan but also, will enable you to settle on good properties, which will go a long way in ensuring that your property appreciates over time.
Have financial preparedness
When you are making a rental property purchase: always know that a property aimed at being rented out is very different from a principal residence. For instance, if you are interested in up to four units, it will be upon you to raise payment of 20% for you to get insured for mortgage approval. In most cases, rental homes investors are subjected to borrowing rates that are high and very strict rules for qualification since lenders perceive them as riskier.
One should be well papered financially for him or her to stay in the market and withstand all the unexpected expenses like; repair bills, interest rate increases, and stratal levies. You need to have other set aside resources that will enable you to solve such issues for you not to out-compete.
Recommended reading: Projected real estate trends in Canada
Ensure you have positive cash flow
You need to know the returns that you will get from your investment. The local market and the conditions within are determined what you are likely to charge for rent. If your rental houses are in desirable areas, the potential for rent increases and will enable you to keep up with the inflation. Always look for profits plus sufficient return on your investment.
Determine your level of involvement
Ensure that you are ready and able to take the landlord tasks. If not you can hire a property manager which will force you to cut your profits for their fees. Therefore, before venturing into this, you should think of how worth it will be for you.
You need to look at the economic factors. The community you are considering is it adding people any jobs? Ensure that the infrastructure within the area attracts more tenants. It should be accessible to transit, schools and shopping centers.