When it comes to investing in properties, there’s key things you need to bare in mind and think through before making a final decision. Investing in properties doesn’t always mean success, it all depends on a number of factors as well as buying the right property in the first place.
What can you afford?
First things first, you need to consider what you can afford to spend. This starts with making calculations based on your monthly mortgage payments, however this needs to go much further. You need to think about the current monthly cost of a mortgage, and then factor in the cost when interest rates rise.
Next, you need to consider the additional costs which includes tax, insurance, agent fees, any remortgaging costs if you have a fixed term mortgage and any ongoing maintenance costs.
Additionally, you need to keep in mind that each time a tenant moves out of the property, you will have to visit the property and at the very minimum, go over the painting. You need to prepare yourself for major repairs in the property which can pop up on any occasion. This applies from replacing the boiler to plumbing. You never know what problems will occur but its best to sort funds out in advance for when it happens.
Finally, you need to create a plan for what happens if tenants refuse to pay the rent. It’s not a quick process coming to agreements with tenants or taking things legal. Whilst this is on going, you will have to pay the bills for the property, so make sure this is something you are prepared for.
Where will you buy?
Now that you know where your budget stands, you need to consider the areas of where you would like to purchase. The two main factors to consider are where the ideal locations are for an investment property and the qualities of owning there. If you plan on taking the maintenance into your own hands, then it’s best that the property is nearby so you can keep on top of it. It’s also useful buying a local property as you will have more knowledge about the area and know where the nicest places are to buy.
You need to take into concept which kind of tenants you’re trying to attract. If you’re going for a young couple, it isn’t a huge deal where the property is located near as they will be aiming for wherever is relatively cheap. If you want to attract students, its best the property is nearby a university as that will be their main concern.
What will you buy?
As you should now have an idea of the tenants you want to attract, it’s time to think about the type of property. If it’s for a young couple, a two bedroom house or apartment would be ideal. However, if you have made the decision that it’s students you want to rent it to, a three/four bedroom house would be suited as it’s more than likely they will be renting with friends.
Another aspect to consider is the return of your investment. You must work out how much money you’re going to be left with every month after you have discounted the monthly costs from your rental income.