This is a great way to make some extra money without risking too much, but it’s also a cool way to secure your finances and protect them in the future as well.
Investing in this sort of property isn’t easy, though, and it’s definitely not the same as investing in a residential property to own for yourself. That’s why you need to understand what makes those buy-to-rent properties so special and unique, and why they’re worth your time, energy, and money.
Becoming a real estate investor can be a wise financial move but like any other business you really need to learn it! Real Estate investors make lots of mistakes when they first get into the business. It's vital you don't, especially if you don't have deep pockets.
Obligations, rules, and regulations
When you’re buying a home, you have to follow certain rules and regulations, but you have to remember that you’re purchasing a property for yourself and therefore don’t have to deal with tenants. But, when you invest in a buy-to-let property, you potentially can become a landlord and have to assume all the responsibilities all landlords have. Preparing for tenants becomes an essential part of your business.
Preparations includes all sorts of different things, from making sure your property is safe and protected at all times to performing annual safety checks that will ensure all the electrical equipment and plumbing is working properly.
Being in charge of all these things is never easy, but it’s just something you have to be prepared for if you’re thinking about getting into the buy-to-rent business.
Check your budget
No matter how big the property you’re thinking about buying is, the chances are it’s going to be quite costly. That’s why you need to do check your budget and make sure you actually have enough money and are able to afford to purchase it.
So, talk to your banker and look into your finances as closely as possible before making any decisions. Make sure you ask the lender all the questions that will help you make an informed financial decision. If necessary, borrow some cash from your friends or family, just to make sure you have enough cash for buying the property.
Don’t forget about the future, though, and remember that you’ll have to maintain your property in the years to come, and that’s going to cost some money as well. So, unless you’re absolutely sure you have enough money – and then some – don’t go buying any buy-to-let properties just yet.
Find the best property you can
The success of your investment is going to depend on a number of factors, and the location of your property is one of the most important ones.
You may be lucky enough to find a property at a perfect location, but very few investors have that opportunity. That’s why you need to think outside the box for a while – instead of looking for a perfect property, you should look for a perfect location. And once you do that, you just need to make it work for you, and that’s it!
Sometimes, it takes a bit more work to prepare a potential site, and that’s when you need to contact professionals. For this reason, looking into those environmental remediation services that can turn an empty site into a place for your property could go a long way. It’s all about being proactive and doing whatever it takes, including finding the best location you can afford.
Inspect your property first
Buying a house without inspecting it thoroughly first makes no sense, which is why that’s something people generally don’t do. The same goes for commercial properties as well, which is why you should definitely take some time to inspect the property you’re thinking about buying before actually doing that. Waiving a home inspection comes with some serious risks. Risks that aren't really worth the savings in skipping the inspection.
Doing a thorough check starts with looking into ownership rights and finding out who actually owns the property at the moment.
Once you do that, you should look into any potential issues that could turn into major problems along the road – anything from plumbing and electrical to mold and bugs. In the end, look into tenants who are already in the property and talk about their plans for the future as well. That way, you’ll know what to expect, and you’ll be ready for any potential changes that could come your way.
Negotiate the price
This is the final part of any property purchase, and this is something you shouldn’t forget either. Negotiating the price and trying to spend less than you’ve initially planned could actually be easier than you’ve imagined, and all you have to do is give it a shot.
Of course, this doesn’t mean you’ll definitely be able to lower the price of the property, but you should at least try to find the right price that will work for you and the seller.
Lowering the price will allow you to invest more in maintenance, and that’s always a good thing. That’s something your tenants are going to appreciate, and establishing this sort of relationship with them is a great investment for your future.
After finding the right price, you’ll have to sign a number of contracts and talk to a number of legal representatives, so don’t be afraid to ask them lots of technical questions. Knowing as much as you can is great, especially if you’re a layperson, and that will ultimately turn you into a better landlord.
After taking care of all of these things, it’s time to look into a few final touches. First, you need to talk to a few people and get the right mortgage for your new property – but make sure it’s working for you, both financially and logistically.
Also, you have to explore different insurance ideas and options as well. There are lots of ways to go, and finding the right insurance – this sort of insurance should be able to cover your property, your tenants and yourself – is crucial.
Finally, sign all the papers and make everything totally legal. Doing this might not seem like the most important part of the entire purchasing process, but it’s a step you’re going to have to make if you want to make the most of your investment.
Now all you have to do is figure out what you’ll do with the space you’ve bought and what the best ways to earn some money on are.
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About the author: The above article on understanding buy to rent property investments was written by Lillian Connors. Lillian enjoys writing about a myriad of home improvement/DIY projects and then spreading the word about them.
She’s also genuinely into green practices, cherishing the notion that sustainable housing and gardening will not only make us far less dependent on others regarding the dwellings we inhabit and what we eat, but also contribute to our planet being a better place to live on.