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.
- 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.
- 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.
- 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.
- 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.
- 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.