Curious about getting a little extra money by getting into rental properties? Here are some tips to get you started.
If you’re looking to diversify your income, joining the rental market may be looking like a good idea. It allows you to work for yourself, increase your net worth whilst pretty much guaranteeing you regular rental income that can easily be scaled.
5 Tips For Getting Started With Rental Properties
Whether your end goal is to own one rental property to help you put aside some savings or you’re feeling more ambitious and want to build a rental portfolio here are 5 tips to help you get started.
1. Know Where Your Initial Investment Will Come From
First, you must find the money for your initial investment or at least know where it’s coming from.
As with many investment ventures, the hardest part is often getting started and you will need to find the money to purchase your first rental property. This money could come from your own personal savings pot, or alternatively if you’re starting from nothing then you may be able to make up the amount through a rental loan offered by companies such as Visio Financial.
Rental loans tend to be granted based on the cash flow of the potential property and not your personal income, so don’t worry if you’re not earning a huge amount just yet.
2. Get to Know the Market
Sometimes getting the best deal means practicing a little patience. Take some time to learn the housing market in the area you wish to buy in so that you’re able to spot a good deal when you see one.
Attend a few property auctions, sign up to mailing lists and keep an eye out in shop windows to see how properties similar to the one you want to purchase are selling. It’s also worth speaking to a few other people in the industry who could be able to give you some inside advice.
3. Know Your Target Audience
Renting out a property to a tenant isn’t really that dissimilar to selling a product to a customer. You wouldn’t invest time and money into a product without knowing your target customer so don’t spend time and money on a property without knowing your target tenant.
Are you hoping to rent to families, commuters, couples or individuals? Understanding who your ideal tenant is can help you to factor in features that they may be looking for in a rental property.
4. Be Smart About Taxes
Rental properties work in much the same ways as businesses with many of their expenses being tax-deductible. Some of the tax-deductable expenses of a rental property include the interest on the mortgage, repairs and maintenance costs and depreciation on the structure.
To make sure you’re not paying more than you need to be, make sure you educate yourself on rental tax laws or consider hiring an accountant to keep your books for you.
5. Start Small and Grow Big
For those who are new to the rental market, it’s often best to start small with a low-risk investment and then to re-invest the profits into something larger at a later date.
Although it can be tempting to go all out on multi-family property or to purchase a property that needs a lot of work and will require you hiring in professional help, this can become overwhelming and you may bite off more than you can chew.