Buying a rental property can be daunting for even the most experience investors. When you’re buying a for the first time, there’s a plethora of terms, acronyms and numbers being thrown at you. Investing in property is a huge decision and a lengthy commitment, but a well-considered purchase can enable you to reap the benefits of for years to come. Here at GSS Property, we understand the magnitude of this decision and the effect it has on your life, but also how difficult it can be to make sure you’ve thought of everything. It can be hard to separate an emotional connection to a house you like, from a solid investment buy.
We’ve created a list of five things you should consideration when buying a rental property to help you cover your bases and make sure you’re making a smart decision.
Whilst this has become more flexible in recent years, the one percent rule is a good reminder to run your numbers accurately and realistically before investing in property. Whilst you may have your own motivations for buying such as getting on the property ladder or securing some extra income and stability, it’s important not to get blindsided by the first house you see for the sake of calling it your own without calculating your return on investment. The rule of one percent means that a house purchased for £170,000 would need to bring in £1700 in rent, excluding the other outgoings you have. This is not applicable if you are looking to buy in an ‘up-and-coming’ neighbourhood which is expected to rise significantly in value over a short time period. A good agent will be able to advise you on areas, and let you know if rents in the neighbour are going up or remaining stagnant.
There’s nothing wrong with a house that needs a bit of work, and some of those in search of a rental property purchase will be actively looking for a project. However, it’s vital that you are realistic with yourself over the amount of time and money it will take to achieve the end result you are envisaging. Be representative when dividing tasks over what you can take on yourself, sometimes alongside full-time employment elsewhere or other commitments, and consider outside contractors for major jobs. Ask for estimates of costs and take into account how long the house will be empty for before you begin to earn back on the investment and ensure this is feasible before you begin. One of the most important things to remember here is that you effectively begin losing money from the day of purchase until the day a paying tenant moves in. For more on ensuring your property purchase is the right one for you, check out our recent blog post, Property Defects to Look Out For.
Manage your expectations effectively by setting aside some budget for unexpected costs before the process has even began. The wonderful world of property is unpredictable, and things will rarely stick to the original timeframes and budgets that are outlined at the beginning. The quicker you come to terms with that and can accommodate accordingly, the better, and it is significantly more likely that you will be able to make your rental property purchase a success.
If you are planning to manage the property, you must first ask yourself whether you are able to commit to being available 24/7. From plumbing disasters to uninvited rodents and everything in between; managing a property means you must be in a constant state of alert, ready to react if required. It is for this very reason that many investors decide on a property management company, like GSS Property, who can take on everything for them. Putting the responsibility on a property management company makes sense as they already have an infrastructure in place to deal with common issues that face renters and will be able to provide a point of contact for tenants around the clock.
The location of your chosen property will play a major role on profitability. Think about the proximity of schools, level of crime, access to working hubs and public transport links as well as the selection of facilities within the immediate area, including parks, restaurants and shops. As with most investments, spending a significant amount of time doing detailed research is worth it in the long run, and can make a difference to the profitability of your rental property.
That concludes our guide to just five of the most important considerations to take into account when buying a rental property. Here at our lettings agent in Okehampton, we offer a range of services within our region of west Devon and thanks to our insider knowledge of the area, we are able to offer a highly personalised experience for all of our customers. Looking to buy a rental property? Contact us today to see what we have available and for more guidance on investing in rental properties.