March 15, 2022
Real estate has always been one of the safest options for investment. Not only have properties shown a steady appreciation in prices, but they also create an anchored rental income. In a world of unfair inflation rates, investing in property is a foolproof way of making long-term wealth.
However, the real estate market can be a winding maze and a little research can go a long way in preparing you. From finding a safe property to managing tenants there are a hundred things to look out for before taking the leap. If you are someone looking to invest in a property to earn rental income, here are some useful tips for some real estate experts:
Don’t rely on a single source to determine the rent for your property. Find out from other landlords, brokers, and the internet. Majorly, factors such as the number of rooms, the location, and the age of your property determine the rent rates. Sometimes, the purchasing amount might not be the be-all-end-all of a property. Real estate can get sold for a price that’s below average for multiple reasons, that could end up costing you more.
As a potential buyer, investigate the property as much as you can. Some of the additional costs that can come your way are – roofing, waterproofing, painting, plumbing, fixing any mould or insect infestation, etc. Once you know the background of a place, you can decide for yourself whether it is worth the investment or not. Remodeling a property can be a lucrative and exciting prospect, but it can definitely cut a hole in your pocket if you don’t plan ahead.
In India, as a landlord, you owe the Municipal Corporation property tax for the property that you are renting out. It varies with each Municipal Corporation and can be higher in good areas that have upcoming growth corridors. Apart from that, there are several other transactions that need to be taken care of such as:
– The rental income
– Security deposit
– Leasing fees
– Maintenance fees
– Pest control
– Insurance
– Homeowners Association Fees
– Additional fees (for roommates, pets, laundry, parking, etc)
– Owner’s Expense (to travel to a property, and maintain it)
The above-mentioned transactions are crucial to successfully managing a property as a landlord. This means you will have to constantly keep track of it and that can get difficult, especially when you’re managing multiple properties or a job. To simplify this work, you can either hire a manager or pick software from the tons available online.
A standard tenant would look for an accessible space for rent. Millennials generally look for properties that are close to their workspace, in a happening spot or at least within its radius, and well-connected by public transport. Along with that access to medical facilities, gyms, parks, etc are an added bonus. Families would look for proximity to educational institutions and so would students. Depending on where you purchase your property, the crowd will differ, and so will your lease agreement and rent pricing. While students would prefer to find affordable properties with flexible leases, working individuals might be comfortable with a more luxurious setup. If you’re looking at your rental income to be steady, then students don’t make for ideal long-term tenants. The bottom line is to research your demographic well based on your needs and goals for the future.
Certain places can be more lucrative than others. For instance, an area that has just started to grow can offer higher returns and opportunities in the future. Moreover, a property in close proximity to parks, beaches, forests, and other escapes that offer the company of nature’s quiet has more value. The location of your property will determine the range of your rental income. Tenants will be willing to pay more for a house that cuts down on commute and is closer to the city than they would for a place that is in the middle of nowhere. Know what the strengths of a place are before you purchase a property there so you can attract the best kind of tenants.
Here is an exhaustive list of things that influence the choice of your property location:
– Neighbourhood
– Crime rates in the locality
– Natural Disasters
– Future development
– Amenities
– Job market
Ideally, rental income should serve as a second source of income. A part of that amount should be kept aside for the maintenance and upkeep of your rental property. Experts recommend keeping aside 20-30% of the income each month to deal with any unforeseen emergencies. A roof could cave in or your plumbing might need replacing, the list goes on and on. You do not want to be stuck with a house that needs repairing. This cuts down the flow of tenants and could push your property out of the market.
This isn’t a rhetorical question. Being a landlord requires strict business ethics that rely on setting boundaries around interactions with tenants. Ask yourself whether you can get yourself to ask a tenant to evacuate if they’ve not been paying their rent. Have a clearly defined lease in place and renew it annually to keep up with the rent hikes. Letting your emotions get the better of you as a landlord is equivalent to letting someone steal from you. If you feel like it isn’t your cup of tea, you can hire a property manager to take care of things for you. Boundaries are crucial to having a thriving business in place and ensuring a steady income for you.
Investing in properties for rental income is a wonderful way to have a secondary source of income. With inflation rates rising, millennials are looking at renting properties instead of buying them. This, along with the steady returns makes it a very lucrative option for investment. However, without careful planning and preparation, it could get chaotic really fast. Hence, it is crucial to do thorough research before you buy a property to earn rental income.
We hope you found this blog post helpful. You may also like to read about some mistakes to avoid when buying a new luxury home and ways to incorporate sustainability into your new home.
Useful Tips for Buying Property for Rental Income