Buying Your First Investment Property: What You Need to Know
As a potential property investor, ask yourself a number of questions before you take the plunge. Across the UK, 20 percent of homes are landlord owned with over two million individuals having put their money in the world of residential property. While this might not be that surprising, investing in real estate offer a decent income that comes regularly and potentials of serious growth are real. Nonetheless, making an income from investing in property is not assured as it seems; success highly depends on various factors. One of this is putting your funds in the right piece of real estate.
It’s what you can afford that matters
Before you even entertain the idea of talking to estate agents or buying a property, know how much you are ready or able to spend. It begins with a number of calculations on the mortgagee payments and much more. The current cost of a monthly mortgage needs to be considered as the cost is factored in once there is a rise in interest rates. Since interest rates seem to have registered record lows so far, a trend that might continue, it’s possible for a potential property investor to jump into the bandwagon courtesy of the lulling effect already there right into sinking sand. Think beyond the current rates and your outgoings in case they go up.
Another factor that has to be looked into is the issue of additional costs as well as the rental income’s tax, agent’s fees, insurance, ongoing maintenance, inspection fees and remortgaging costs for those with fixed mortgage terms.
It is also important to consider the days the property will remain empty. Letting agencies indicate that a rental property usually remains empty for about 20 or so days annually. As such, as tenants move out and move in, a gap is needed so that you can have some time to carryout maintenance in the property. At the same time, there will be times when a void period cannot be avoided as tenants cannot be found in time.
Another thing you need to prepare for before you invest in residential rental property is putting a plan in place just in case you end up with problem tenants. These individuals might stay in your property and refuse to pay the expected rent for a couple of months. Chances are that some time will be required to iron out the pending rent issues, agree with the tenants or seek legal redress. At this time when you’re not receiving any rent know how you will be paying your bills as these steps are pursued.
What to buy
It is also critical to know what to buy by having in mind the individuals you plan to target such as students, young professionals, families, single men and women or high-end tenants. Look into the return of the investment by doing your calculations right and find the property able to offer better returns. Be clear about the amount you will be left with once monthly costs have been subtracted from the income of your rental property.
At the same time, the prospect of selling your property in future is always there. A good track of rental history over the years will help you dispose easily. However, if you invest today in a property stuck for ages in the property market, a tough market awaits when it comes to selling the same.