You have recently come into some money, and are looking to make a long term investment. You already have your own place and are happy staying there, so investing in a property to ultimately let out is certainly not a bad strategy. While buying a property to let has its downsides, its upsides far outweigh these. The theory is, that someone else will be paying your bond, while you actually own it. However, you have to invest wisely, and hopefully this article will help steer you in the right direction.
Cost verses return
What sort of investment are you looking for? This decision will impact on whether buying property is the way to go or whether it’s easier to invest your money in a bank where you are assured of a fixed interest rate. This is why it’s so important to weigh up cost verses return. If you are going to start paying money out of your pocket to make up for shortfalls, then the investment is going to become a liability rather than an asset. A rule of thumb to aim for is a monthly rental of around 125% of your mortgage repayment. Remember, over and above your bond repayments, you will need to factor in additional costs, like insurance and maintenance and the possibility that you could be stuck without a tenant at any given time.
Going it alone or with an agent
Although you may make slightly more money doing everything yourself, you may want to seriously consider rather working through an agent. It’s a small price to pay when you realise what is involved trying to manage a property on your own. Agents have an established infrastructure that deals with things like advertising, interviewing, screening and finding the right tenant. They also have a network of suppliers and workmen to deal with maintenance issues. And minimising paperwork and day-to-day dealings with tenants means fewer headaches and more time for yourself. (Need help leasing your property? Contact us)
The right area
You don’t want to buy the first apartment you come across simply because it’s available at a bargain price, and then find it’s a battle to let because it’s in the wrong area. Do your homework and research before you buy. Is it in close proximity to shops and schools? What sort of transport system is available, and is it reliable? Not everybody owns a car. The more accessible it is to amenities, the easier you’ll find it is to let. Remember, your tenant could come from a broad spectrum of people, so finding the right area is all-important for finding a suitable person to fill your property.
Is there a plan B?
In the perfect world, finding a tenant won’t be a problem, and you’ll be assured of a monthly return which will comfortably cover your monthly repayments of your bond. However, we unfortunately don’t live in the perfect world and you could find yourself without a tenant for any period of time. If this should happen, do you have the means to carry you through these lean times? Make sure you have some sort of plan to cover yourself in the event of the unexpected happening. Also ensure your insurance is up to date. Disasters like burst geysers or unexpected break-ins can occur at any time.
At the end of the day, buying a property to let can be a lucrative way to invest, provided you do your homework and research properly and ensure you deal with a competent and well established agent. Need help leasing and managing your property? Let us help you.