Buying a rental property and becoming a landlord is an exciting venture. It has the potential to bring in extra income, and for many people, investing in a rental property is their first big step into the property market.
Although there are many benefits to buying a rental property, there are also risks and considerations that need to be taken into account before taking the plunge.
Gunston Strandvik Attorneys Inc. outlines some points to keep in mind before investing in a rental property.
WATCH : How to accelerate your property investment success.
Expenses
As with buying any property, there are upfront costs and ongoing costs involved in owning an investment property.
As the name suggests, upfront costs need to be covered before you can start looking at renting out the property. These include the cost of registering a bond and transferring the property into your name, as well as attorneys’ fees and bank initiation fees. Therefore, it is essential that you are financially stable enough to meet these before you start looking for a suitable investment property.
Once you’ve bought the property, there are many ongoing costs that you need to budget for. These include sectional title and homeowner association levies if the property is in a complex, as well as rates and taxes, insurance and maintenance.
With most rental properties, it is likely that there will be a period when your investment property does not have any tenants. You need to be quite sure that you have the funds to cover your monthly bond repayments as well as the ongoing costs like rates and taxes for several months if this happens.
Income
Although the ideal is that the rental income should cover the levies, rates and taxes while still providing a decent income, in some cases, this is simply not possible – especially in the early years of ownership.
Determining the monthly rental for the property will depend on a number of factors, such as location and available amenities, as well as the level of demand for rental properties in your area and what other rental properties are in the same area.
Investing in a property that meets the set criteria is likely to provide a higher rental income, so it’s important to research the areas you are considering thoroughly.
Responsibilities
Being a successful landlord requires hard work and dedication beyond simply buying the property, so you need to be quite sure that this is really what you want.
As a landlord, you need to ensure that you understand all your responsibilities. These include maintaining the property and making sure that the chosen tenants are the sort who will keep up with monthly rental payments and look after your property.
There are also some legal aspects to consider before investing in a rental property, including the legalities of ownership and the laws surrounding the rights of tenants. It is essential to understand these legalities before putting in an offer on an investment property.
Although owning property is a cornerstone for creating personal wealth, it’s important to keep in mind that it is a long-term investment rather than a get-rich-quick scheme. So be realistic about your expectations, and don’t expect overnight success.
Writer : Sarah-Jane Meyer
