Buying a rental property and becoming a landlord is an exciting venture. Not only does it hold the potential to bring in extra income, but for many people, investing in a rental property is their first big step into the property game. And while the benefits of buying a rental property are many, there are risks and considerations that need to be taken into account before diving in.
Below we outline a few things to keep in mind before investing in a rental property.
What are the upfront costs?
As the name suggests, your upfront costs need to be covered before you can start looking at renting out the property. These include bond costs, transfer costs, attorneys’ fees and bank initiation fees. It is important that you are financially stable enough to cover these costs.
What are the ongoing costs?
Once you’ve bought the property, there are a few ongoing costs that need to be budgeted for. These include things like levies, rates and taxes, insurance and maintenance.
What rent will I receive?
Although it is ideal for the rent to cover the levies and rates and taxes while still providing a decent income, in some cases this is simply not possible. Deciding on the monthly rental cost will depend on factors such as location, amenities, and supply and demand. Buying a property that meets most of these needs is likely to provide a higher rental income.
Can I afford to have a vacant property?
As is the case with many rental properties, it is likely that there will be a time period where the property does not have any tenants. As the owner, you need to make sure that you have the funds to cover the rental and the ongoing costs in this case.
Do I know the legalities?
There are few legalities to consider before investing in a rental property, including the ownership legalities and the laws that surround the tenants’ rights. It is important that you understand these legalities before putting in an offer on a property.
Do I want to be a landlord?
This may seem like an unnecessary point to mention here but it is a very important point to consider. Being a landlord takes hard work and dedication beyond simply purchasing the property. As a landlord you need to ensure that you understand all of your responsibilities, including maintaining the property and making sure that the right tenants are chosen.
If you’d like to know more about the legalities surrounding property ownership, please contact us at [email protected]