For many beginners, investing in real estate can be both exciting and nerve-wracking. Many have been growing their wealth through rental properties and by exercising caution.
While investing in rental property is still a good way to grow your wealth, the unpredictable market poses certain risks for rental properties. You should study property investment to help you avoid making costly mistakes. You must also know the possibility that not all will result in income-producing ventures, so you can make better decisions.
How do you make a rental investment successful? Here are some tips that can help you as a beginner:
Pick a good location
If you want to invest in rental property, location is a very important aspect to take note of. The location you will choose will determine the types of tenants and income you will get. For example, if you purchase a property located near schools or universities, expect to experience a season of low earnings because of school breaks.
Another reason why a good location is important in bringing in profits is that people will look for a place that is near other conveniences, such as stores, restaurants, banks and hospitals. A good location also translates to a safe neighbourhood, which will easily attract tenants.
Get a good real estate agent
Beginners often feel overwhelmed when dealing with different aspects of real property. There are so many details that may not be familiar, but getting a good real estate agent in Australia can eliminate a lot of stress on your behalf.
A real estate agent will help you find the best deal for your budget by negotiating with the property owner. They will search properties that meet your criteria, connect with the seller and set appointments.
A good real estate agent can also help you in dealing with contracts by providing advice and insights based on their experience. Aside from convenience, hiring a good real estate agent also means you are protecting yourself from scam investments. These agents are licensed professionals who have the responsibility to protect and advocate for the client’s interests.
Know the average rent rate
When it comes to rental properties, the rental rate is the bloodline of your investment. Before you choose a property, find out what is the average rental rate in the area. The rate should be able to cover at least your monthly mortgages and other taxes.
You also need to check the rate projection for the next few years to make sure it is profitable. When determining the rental rate, you need to compute the cost, including the monthly mortgage, property tax, maintenance and insurance.
Pick a low-maintenance property
For beginners, consider starting with easy-to-maintain property, such as condominiums or single-family homes. Condominiums often have associations that are responsible for repair and maintenance so you’ll worry less. However, single-family homes tend to have long-term renters, thereby a more stable flow of income.
When looking for an easy-to-maintain property, don’t forget to see the appreciation potential. Properties that have minor renovations and are aesthetically pleasing can charm renters to pay more. And this can help you sell it at a higher price in the future.
Ask yourself honest questions
Getting involved in rental property investment in Australia is not easy. There is a lot of work involved, and if you are not aware of the number of tasks at hand, you will feel overwhelmed. Such a feeling often leads to poor decision making. So, ask yourself these questions first.
- Are you capable of managing the property yourself, especially if you are working full time?
- Are you willing to deal with people from different backgrounds and personalities?
- Can you deal with complaints or eviction?
- Do you know how to screen potential tenants?
- Do you have an understanding of how the rental property market works?
- Are you willing to spend time learning about your legal obligations and other aspects of the industry?
- Are you ready for any financial risks that come with a rental property?
These questions will help you become a better landlord and prepare you for the reality of the business. Being honest with these questions will help you assess your strengths and weaknesses as a potential landlord.
If you feel like you are limited in certain ways, hiring professionals in the industry can help you manage the rental property better. From real estate agents to property managers, they can help minimise mistakes and maximise your resources.
The bottom line
As a beginner in rental properties, you need to have healthy realistic expectations of the industry. Any investment comes with risks and any wrong decisions can lead to costly financial consequences.
The common perception that investing in rental property is just like sitting and receiving money is far from the truth. Rental property requires a lot of work from paperwork, maintenance and dealing with different types of people. So, it should be treated like running a business where hard work, wisdom and patience are needed to make it profitable.
Vanessa is a writer who’s greatly fascinated with lifestyle, health, housekeeping and all things forensic. The best way to describe her? A frugal mom who enjoys coffee and a good book.
