When looking at potential investment vehicles, the real estate market stands out as the obvious choice. While there are many ways to enter this sector, becoming a landlord is one of the most attractive. It creates an ongoing passive income stream while the asset itself is almost certain to appreciate in value too.
There is no question that it has the potential to deliver great ROIs, but it would be naive to think the road ahead is easy. Hard work and a comprehensive strategy will be required. Make sure the following five features are considered, and you won’t go far wrong.
Selecting The Right Properties
Many landlords dive straight in at the deep end, acquiring the first property they find. You wouldn’t do this when buying your home residence, and should not rush rental properties either. A fixer-upper could be a good way to save money but does mean you won’t see any income for some time. Location is another key factor. Buying on a busy road can be ideal. The property is cheaper while providing access to amenities, which matters to many types of tenant. Perfect.
Most new landlords opt for properties that are relatively close to their homes, but this isn’t a necessity.
Protecting Your Investment
You should protect every asset you have, but your rental property needs extra care. You will still face the typical risks associated with home buildings, like weather damage or burglaries. But you additionally encounter the threat of bad tenants. Selecting the most appropriate landlord insurance coverage is vital. It can protect you from damages caused by disrespectful tenants as well as your income stream. So, even if tenants stop paying, you won’t fall behind.
The safety net is essential for your ROIs, and will also deliver the peace of mind that you deserve.
Getting The Best Landlord Mortgage
Becoming a landlord is a distinct area within the real estate investment arena. However, there are several approaches you could take. Some people simply rent out their old home after moving in with their spouse. When looking to take on a new property, though, finding the right mortgage is vital. A buy-to-let mortgage is a very popular choice. This allows you to make a passive income from your tenant while slowly buying the asset too.
Interest-only deals are another option. You won’t own the property but can create income from this stream.
Building A Portfolio
Even a single investment property will make a positive impact on your future. Nevertheless, true wealth building requires you to build a portfolio. It can be more accessible than you think, not least when taking on multi-unit investment properties. Lenders may see this as a reduced risk on their behalf. After all, you only need occupants in some of the dwellings to break even. When you receive multiple applicants for one unit, many will apply for others in the complex too.
Ongoing property management and maintenance can be a little easier. Whether you take the DIY option or call an agency.
Choosing The Right Tenants
Finding occupants is relatively easy. Choosing the right tenant may prove a lot harder, though. Of course, you need to know that they will pay the bill. Likewise, they must respect the property. However, every month without an occupant or time spent preparing the unit for a new tenant costs you dearly. So, analyzing applicants to find candidates who are likely to stay for longer is a wise move. They won’t stay forever, but you don’t want new tenants every six months.
Using an initial 12-month contract is a good tip. It’s long enough for stability but short enough to cut ties if the tenant becomes unreliable.