5 Tips for Buying Rental Property

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Investing in a property to rent is one of the best ways to generate a passive income stream and grow your wealth. However, before purchasing a property, you need to make sure your investment will be able to make money – both in the short and long term.

When making a decision on an investment property, don’t rush it. As there are a few factors to consider when buying a residential home, there are factors to consider when buying-to-rent, too.

Investors should think like tenants when choosing an investment property – your purchase should be attractive to prospective renters and guarantee a stream of income for years to come. Hiring one of the top rental management companies in scarborough will also allow you to take a more hands-off approach.

Here are five other tips for investors who want to purchase rental property.

  1. Choose the Right Neighborhood

Always consider the location of your investment property and what type of tenants it will attract. For instance, while a property near a college will always be in high demand, the flipside is that you may have a high tenant turnover rate.

A landlord renting property to students may also have to deal with other issues – these could be noise complaints from the neighbors or financial instability from younger tenants.

  1. Consider the Costs

When you purchase a buy-to-let property, bear in mind that it may not see a return on your investment within the first few years – especially if you financed your purchase with a bond. Because your rental won’t pay itself off immediately, you should consider the costs involved before your property starts making money.

Make sure you know the additional expenses of owning a rental property – such as municipal rates (which vary from area to area) and property maintenance.

  1. Investigate the School District

Although purchasing a rental property near a school has always been a good move, making more money from the rental is not always guaranteed. Instead of investing in property near a random school, take a look at the school district first. The quality of schools in close proximity to the property will affect the value of your investment.

Generally, landlords will reap a healthy return on their investment; however, the property’s value when you eventually decide to sell it should also be taken into account.

  1. Research the Crime Statistics

You’re probably already aware of neighborhoods with high crime rates. Still, no tenant wants to live next to a hotbed of criminal activity – even for a low price.

Before purchasing a property, speak to the locals about the crime level in the area and visit the local police station to get a clearer picture of the crime rate in any specific area.

  1. Look at the Competition

Look through other rental listings in the area. If there are a lot of rentals like yours on the market, chances are the supply is lower than the demand.

Although a moderate level of competition is healthy for any business, it is not necessarily good for investment properties. Higher vacancy levels in a given area mean tenants have more options, which could impact your bottom line.

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