If you are venturing into investing in real estate, then rental property is likely to be on your list. Even though you will be receiving a monthly income from such properties, you have to keep the expenses down to ensure that you actually net a profit each month. And to help you identify good investment properties, we list five tips.
Consider Down Payment on Rental Property
When deciding to buy a rental property, you will likely be looking for a bank loan to fund the purchase. And generally, they will ask for a larger down payment for the loan. While a 3% down payment would have sufficed in case you were buying the property as a live-in, you will need to cough up anywhere up to 20% in down payment for investment properties. So, make sure to check your finances and see to it that you have the necessary personal funds ready to meet the down payment requirements.
Higher Interest Rates
In addition to a larger down payment, investment property mortgages will also attract a higher interest rate. Compare the various offerings from the bank and ensure that your monthly revenues will be sufficient enough to pay the higher monthly installments. There might be offers that can get you a lower interest rate loan in certain situations. So, be sure to check it out with a mortgage consultant.
Look At Renovation
Check out the renovations done to the property and make sure that they are good enough to rent out immediately. If you are a first-time investor, then it is advisable not to invest in properties which require too many renovations. This is because your lack of experience in the field can make you put too much money on the renovations that it might become unprofitable for you. So, as far as possible, stick with buying homes that do need many renovations and can be put up for rent immediately.
Check Out The Neighborhood
In order to get the highest rent for the property, you will need good renters. And such good renters will only be attracted to your property if your neighborhood is good. So, check out the neighborhood and make sure that the community is a warm and friendly. Also ensure that all the necessary amenities like hospitals, supermarkets etc. are nearby. Plus, the crime levels should be at a minimum. As long as such criteria are met, the property will attract renters who will be ready to pay your expected rent.
Calculate Return On Investment
Every investor is looking to bet his money on opportunities that give a high return real estate. And you too will invest in any property only with this goal in mind. As such, it is important that you calculate the rate of return before you take the purchase decision. Estimate the monthly revenues and expenses related to the property and see what profit you will be left with each month. Ideally, you should pick a home that gives you the highest monthly profits. But if you come across deals that promise very high monthly returns, then be sure to thoroughly check them first to ensure that they are not fraudulent claims.