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Buying Rental Property
Interest rates are the lowest they ever have been are expected to remain low for the next year whilst the economy is given a chance to recover.
On the down side you will need a large deposit: at least 60% of the property purchase price and investment property mortgage rates are fairly high at around 5%. You will need to browse the internet to get some basic information and then call an independent mortgage broker to find the best deal.
Buying rental property is a long term investment. The key factors when considering what property to buy is to stick to some basic rules:
1. Location - this is all important. You need a location that will attract a lot of tenants so that when one tenant moves out you will easily be able to find another. No tenant means no income and you will need to fork out to cover the mortgage. Good locations are near universities, good schools, employment centres and good areas. The best way to start finding a good location is to speak to your local rental agent. They have the experience of knowing what rents well. A nice-looking house in a not-so-good area won't rent well on a continuous basis.
2. Decor: rental property has to be in good condition. There has been an increase in rental properties as homeowners who have been unable to sell their house have rented our their house and the market is competitive. And you want reliable, trustworthy tenants who care about their accommodation. The property therefore needs to be maintained to a good standard. When you look to buy rental property you need to budget enough to decorate it to a good standard in neutral colours, and an ongoing basis you will need to maintain the decor to keep the property in good condition.
3. Parking and transport: Be sure to buy a rental property that has it's own parking. Tenants can pick and choose their rental property these days and the majority want their own parking. No parking often means no tenant or a tenant moving on after only a short time.
4. Work out your figures carefully. There are ongoing outgoings that must be factored in when you are buying rental property. The income needs to cover the mortgage, 3 months worth of rent to cover void periods, insurance (buildings plus you can choose to insure against void periods), tax, maintenance costs and management costs (if you choose to use an agency).
5. Be prepared to keep your tenants happy. If you are managing the rental property yourself, be available, return their calls promptly and deal with any problems as soon as you can. If you are using a management agency then keep in close contact with the agency to make sure that everything is in order and to check that your tenants are happy.
Buying rental property should be considered a long term investment. Keep money aside to cover void periods and be prepared to invest some time in it. The key thing you must do is research the location, have enough cash aside for maintenance and then attend to it regularly.
About the Author
Debbie Morgan writes for the UK Property Search Engine, Wheres My Property and Renovate Alerts, the site that finds property to renovate. Debbie also contributes to Toddler Bedtime Tips.
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