Becoming a landlord is a great way to generate some extra income every month and make a longer-term investment, but it can also be hard work. Recognizing that it comes with much responsibility is crucial, or it could end up being a decision that you come to regret.
If you consider what is needed and necessary in advance, it will make the process easier and could help to make it a success. Here are 5 things to consider when renting out an investment property.
Finding the Right Property
This is possibly one of the most important decisions you will make on your journey to becoming a landlord. Get it right, and it could prove to be a lucrative financial decision but get it wrong, and you could lose a lot of money and may regret your decision for a very long time.
Consider the location, the purchase price, expected rent levels, and your target market, and you will be well on your way to finding the right property. Involving an agent is a great way to find a property that you otherwise might not come across. Companies like TFS Properties, for example, are experts in finding off-market properties that can usually be acquired for a far more competitive price.
How will you Deal with Maintenance Issues?
Over time, your property will likely require some care and attention, so it’s important to know in advance how you will deal with anything which may arise. The sooner you get maintenance issues fixed, the happier your tenants will be, so you may want to consider developing relationships with various qualified tradesmen.
If your boiler packs in or your roof are leaking, you will know they can be fixed efficiently and within a reasonable timescale. Many landlords like to keep the costs down and learn how to do certain tasks themselves, so if anything crops up they can deal with it. This also comes in handy if upgrading your property and could save you a fortune.
Be Aware of the Costs
Buying a property may be your biggest expense, but it isn’t your only one. There are several ongoing costs associated with renting out a property that will eat into your profits, so you must make sure that they are affordable.
Insurance is crucial to ensure that you and covered should anything untoward occur or the structure of your property comprised. If you intend to lease your property with furniture included then as well as buildings cover, contents insurance will also be needed. Premiums vary from company to company, so spend a bit of time getting the best deal available.
There may be times between tenants when your property is unoccupied. During these times, you will need to pay any costs associated with heating or lighting the property as well as any local taxes which may be payable. Make sure you have a contingency fund so you can afford to keep things running during vacant periods.
Do you Need a Mortgage?
If you intend to take a mortgage to fund the purchase, shop around for the best deals. Your lender may insist that you apply for a buy-to-let mortgage, which may bear a higher interest rate than a standard residential mortgage.
Compare rates and establish whether there is an arrangement fee involved. You must make sure that your rental income covers your mortgage and other associated costs, so do your sums and make sure the purchase makes sound financial sense.
Maximize Your Property’s Appeal
Before letting out your property, make sure it looks good. If it’s tired, dated, or unappealing, you may not attract the same level of interest. A freshly decorated property that looks homely and welcoming may also allow you to ask for a slightly higher rent, so it’s a worthwhile task to undertake.
Although keeping colors fairly neutral is probably a good idea, don’t use anything too light. It will get dirty very quickly and is likely to show every little mark. If your property needs more extensive works such as a new kitchen or bathroom, budget based on your target market, and the rent levels you may expect to obtain.
If, for example, your property is in an area that appeals to students, spending tens of thousands on a kitchen is not a good idea. If, on the other hand, it’s in an affluent area and your tenants are likely to be high-earning professionals, they will expect a kitchen of superior quality that is commensurate with rent levels.