Buying rental properties can be a great way to increase your wealth. However, as with most real estate investments, it is sometimes difficult to tell if you have found a good deal - especially the first time around. Here are some things to consider to make sure renting is a great investment.
Steps
Step 1. Location
If the transition is intense, it is easier to rent. A cartel will generally attract more responses than a printed ad. If the location of the property is in a nice place, renting will usually be faster. These observations are also valid for places close to the main services.
Step 2. Numbers
Make it count. Keep track of any recent spending in your accounts, and make sure you have positive cash flows from the start. Some cost items to consider are mortgage payments, taxes, insurance, maintenance, management, utilities, and something in reserve. The biggest mistake is not budgeting enough resources for reserves. For a small property, at least € 100 per month must be kept for renovations, vacancies, roof renovations and at least € 200 per month must be budgeted for large properties.
Step 3. High housing prices
Look for cities where housing prices are high, as these create a higher demand for rents. What do people do when they can't afford to buy? They go on rent.
Step 4. Low maintenance properties
Avoid cedar wood roofs and wood-paneled buildings. Beyond the current expenses, think about what kind of maintenance the building will need. Less maintenance means less headaches and more profits.
Buildings that require a lot of maintenance have many floors, stairs, elevators, flat roofs, basements. Large housing units require more maintenance than small ones. But very small units such as mono-rooms tend to remain more vacant, so they require higher costs for cleaning, painting and for prospective renters to visit them. Mid-sized units with a great location require minimal maintenance and remain vacant for very little
Step 5. Previous quality leases
Ask for information on previous rentals. Notice how long the tenants stayed on average, and how timely their rent payments were.
Step 6. Below average rents
Buying a rented property with a lower than average rent means that you will have to increase the rent. Raising rents means increasing the value of the property immediately, because it is based on the income it produces.
Step 7. Compliance with local and fire laws
Examine them and inform the relevant offices if there are any problems.
Step 8. Less than 20 years old
This is somewhat of an arbitrary indication, but if you limit your search to newer properties, you will probably have fewer problems with maintenance and compliance with current regulations.
Step 9. Offsite Owner or Caretaker
Properties whose owners or caretakers live off-site are often the best deals, as it is difficult to manage a property from afar. An off-site seller is more interested in a quick sale than a high price.
Step 10. Number of inhabitants stable or growing
Constant density is fine, but if you can buy in an area where it is growing, you will be able to rent the unit more easily, and over time the value automatically increases.
Advice
- Usually the price per square meter (price / square meters) is calculated and the 5 units in the area with the lowest price per meter are identified. This avoids over-paying the property or having the loan request declined by the bank due to the excessive purchase price.
- Properties with a shabby appearance are easier to enhance with a simple whitewash and tidy up.
- Buildings with faulty fixtures, broken window frames, crumbling plaster and no flower pots are the easiest to embellish. On the other hand, buildings that have suffered fires or that have severe structural damage should be avoided. Repairing an illegal construction can be as simple as consolidating the damaged foundation. The concrete foundations and pillars can be built for € 2,400.
