5 tips for buying your first rental property
Investing in property is often viewed as a safe investment. However, just like any investment, it’s essential to understand what’s involved before investing your hard-earned cash.
Do you really want to be a landlord?
Be prepared to be the first port of call for any problems relating to your property that your tenants may have. Can you unblock a toilet or deal with general maintenance issues? In the early days of investing, you’re unlikely to have a team to manage this for you, so if being hands-on isn’t your thing, perhaps this isn’t for you.
Find out more about landlord responsibilities at https://www.gov.uk/renting-out-a-property.
If you decide you’re going to go for it, here are five tips to consider when making your first rental property purchase.
1. Clear your debts before investing
It is not recommended to invest in a property to rent out if you already have existing debts to repay. Even if your investment promises to return more than your debt, it’s good financial sense to always ensure you have a margin of safety and remain able to pay what you currently owe.
2. Get your deposit together
The down payment that is required to buy a property for rental purposes is usually much higher than a typical deposit for an owner-occupier place. It could be as high as 20 per cent.
Beware of high interest rates
The interest rate on a rental property will be higher than traditional mortgage interest rates. Shop around for the best deal you can get because higher repayments will impact the amount of profit you can make from your investment.
4. Calculate your costs and margins
Don’t go into the rental property market without working out your likely cost and profit margins. Set a goal of around 10% profit, but remember to factor in maintenance costs and insurances.
5. Avoid a big project for your first purchase
Large-scale renovation projects can be costly. It may be far better to make your first step into the rental market with a home that requires only a few minor repairs.
As you build your portfolio, property inventory software could help you manage your properties, such as that provided by https://inventorybase.co.uk.
Making your first steps into property investment is exciting. Understanding risks and being prepared to grab opportunities could be the key to your success.`
- Beware of high interest rates