If you are looking to purchase a property as an investment, you should look for some advice on buying a place and letting it out.
Renting out a property can bring in welcome extra income and you can wait until the property market is better and sell your home for a profit.
If you price the rent right, you will be able to pay off your monthly home loan premiums with interest, and you may have some extra left over which will add to your own money, or it will allow you to pay off your debt quicker.
Finding the right place to hire out, finding tenants and coming up with a marketable agreement can, however, be somewhat daunting.
The following tips and advice will help you to make the best choices in finding the perfect property for the rental market and finding the right tenants to hire it out to. They will also help you to come up with a good contract that will benefit you and your tenant.
Advice on buying a place and letting it out
- How to choose the right property
When you begin looking for a property to buy and then rent out, you will need to know what sort of property to shop for so you do not begin without an aim.
There are a great number of different kinds of properties that attract different kinds of tenants and you will need to look at the following things before you make your decision:
- What is your budget?
If you have a budget on the lower end, you will have to think of going for a property that is not so well-maintained and that might have some flaws, a property that is in a ‘bad’ area or a small apartment type property.
For a slightly higher budget you could go for an apartment in a secure complex with parking and other amenities, or a small house in a lower priced area.
With a high budget you could buy a large house with a garden, swimming pool, parking and security, or a smaller place in a popular area with a great view.
- What sort of rent do you want to make?
If you want to ask for higher rent from your tenants, you will have to offer them more.
A great area, secure parking, security, a well-maintained property, more bedrooms and bathrooms, furnishings, water, electricity, DSTV or other extras, a garden and allowing pets on the property will allow you to charge more.
- What sort of money can you afford for levies etc.?
You will have to pay higher levies for more expensive properties every year. However, if you buy an older, cheaper property you will probably have to pay for repairs, replacements and other maintenance more regularly than you would for a newer property.
- How to find the right tenants
Certain properties attract certain tenants.
Some properties are in higher demand than others. If you buy a property, particularly a small flat, in an area where there is a tertiary institution, there will be a lot of demand by students to rent your property. However, if you buy a small house in a suburb area, you will have a lot of demand from young families.
- Decide what sort of tenant you want
If you want a tenant who will be more likely to look after your property and less likely to cause damage, not pay their rent or prove problematic in any other way, then you should offer a clean, well-maintained property and specifically ask for professional people. For a higher rent, you are more likely to avoid problematic tenants.
- How to put together the right contract
Consider the future.
You must make sure that you charge enough to be able to cover your costs for your home loan, interest and levies. It is not worth it to rent out a property if the property is still costing you money after receiving your rent.
- Get professional advice
Ask a rental agent for help in putting together a fair and legal contract.
- Consider what you and your tenants want
In order to keep everyone in good spirits and to ensure that you get respect from your tenants, treat them well. Include them in the discussion about what the rules should be and speak to them regularly to see if they are happy.
Some more useful information
When you buy a place to let it out again there are certain things to look out for in the market and it is always good to know the risks.
Make sure that the house, flat or whatever property it is that you intend letting is the investment you want. There’s a possibility that your hard earned cash may perform better if invested somewhere else.
If you know a friend or family member that has ever bought property to rent out again then ask them about their personal experiences in the market. Or join in with some of the online discussions happening around the Internet on the various investment advice forums.
If you are buying a house or flat to rent out again then choose an area that you think people would like to live. What that means is look for things like good schools and colleges that may be close by or other things that may have a special appeal to people living in that area.
Look for things like easy access to major roads as well if you feel that the area you wish to buy in may be a place where commuters would possibly live. Put yourself in the mindset of the type of person that may become your tenant.
For instance if you think that the place would be ideal for students to rent then it would need to be comfortable and simple to clean but not too luxurious.
Remember to negotiate prices
Because you are buying a home as an investment to rent out you have similar advantages as first time buyers do when it comes to negotiating for a discount on price, never pay the asking price.
If you do not have to sell one property before being able to buy another then you are not a part of the chain and there is certainly less risk of a sale falling through. This can prove to be a huge advantage for you and put you in a position to negotiate a discount on property.
Keep this advice in mind and it may give you the edge as an investor looking to buy a place and let it out and could help you to maximise your profits.