Property is a common choice for those looking to pour their money into an investment. While some will look for a short-term investment, buying a home to increase its value before flipping it, others anticipate much higher returns by sticking with a property. Often, they anticipate that renting a property as a landlord is the way to do that. However, making a timely return, or a return at all, isn’t guaranteed when you let. In fact, your investment can prove more bothersome and costly than you might imagine if you’re not thoroughly prepared.
This is an essential understanding if you want to feel any measure of satisfaction with your rental property. For one, don’t treat it as an investment that pays off the same way stocks or bonds might. It’s a lot more active than that, and gives its returns in piecemeal, so think of it as more of an income source. Bear in mind that the money you can make is also dictated by the costs, such as maintenance, furnishings and replacements depending on what you provide in the property, agency costs, and much more. You’re not going to be free to treat all income as disposable and until you pay off the home loan, you could be looking at little return. It’s in the long haul that you start making real gains.
The pro attitude
You’re only going to make those returns if you treat it like a business, too. Most of the most common mistakes a landlord makes revolve around the money side of things. Not knowing their market and charging too much (diminishing chances of getting tenants) or too little (meaning costs can end up rising over returns). A key understanding of the finances involved is crucial, so keep records and budget well.
Experience dealing with tenants
The tenants can be the most complicated part of the process, from landing them in the first place with the right marketing strategy to making sure you don’t have tenants who are going to damage the investment, be consistently late with rent, and be more of a hassle than anything. If you’re new to the business, pairing up with a property management team might just be the one way to save yourself from the many follies that new landlords make. This includes not only an extra level of marketing reach, but vetting techniques that make sure you only get the tenants with good rental histories and the kind of credit report that makes them as safe a bet as possible.
The right place in the market
If you are getting more hands on, particularly in finding tenants, then you have to make sure that the right people are out there for your property. Some cities and towns yield higher rental returns than others so if you have some geographical wiggle room, then make us of it. Then look at who in particular is most likely to want to live in such a property. If it’s not close to a college or public transport that can take them there, for instance, don’t rent out to students. They might be willing to take the home, but they’re a lot more likely to leave it when they realize it doesn’t suit their needs. The area is just as important as the property itself when avoiding a tenant mismatch.
Is buy-to-let a good investment? Certainly, if you have the right approach to it. The points above are going to help you ensure that you do.