Buying your first rental property is not an easy feat. You may not want to look at properties that will not match your needs. So, if you are looking for a rental Sydney, here is a list of tips to guide you in buying your first rental property.
But remember that there are many things that you will only learn after buying your first rental property.
1. Do You Fit as A Landlord?
Do you know how to use a toolbox for repairing and maintenance? Of course, you can hire an expert for your small or big tasks, but it will take a bite out of your income. Property owners who deal with two or three properties often do their repairs on their own to save money.
Being a landlord may not be correct for you if you are not used to making your way around a toolbox and have no spare cash.
2. First, Pay Down Your Debts.
An experienced investor knows how to manage their debt. However, if you are starting fresh, it is advisable to be as debt-free as possible. For example, if you want to buy a property for Perth rent or Strathfield rent, but you have car loans or unpaid medical bills, purchasing a rental property may not be the right decision.
To calculate your debt-to-income ratio, add up your total monthly debt payments and divide the sum by your gross monthly income. If your ratio is 43% or higher, you have no chance as 43% is the higher ratio a lender will allow to issue a qualified mortgage.
3. Select A Right Location.
So many locations! But which one to choose?
You may not want to be stuck with a rental property in an area that is declining. Always choose a locale with a growing population and constant revitalisation. While looking for locations, look where there are low property taxes, low crime rates, a growing job market, green spaces, malls, restaurants, movie theatres, and potential local attractions. Taree rent and Perth rent properties are good options for you as the areas keep upgrading with time.
4. Talk to The Neighbours.
Talk to the locals or neighbours in that area. Ask them about the owner or tenant and if they had any difficulty in that area. Then, drive around the neighbourhood at various times of the day during different days of the week to understand the locality.
Communicating with the neighbours will also help you understand the people residing there. If you are planning to buy a rental Sydney or Strathfield rent property, communicate with the locals.
5. Keep Your Personal & Business Finances Separate.
Avoid investing your money, which is kept for personal expenses to your business, as you can end up being personally liable for the financial actions. In addition, combining personal and business finances can lead to tax complications too.
Keep your personal and business finances separate by opening a small business checking account to limit your liability.
6. Get the Down Payment.
You will have to pay a huge amount of down payment for a property you plan to invest in, compared to a primary residency. 3% is not going to cut it!
Given that the mortgage insurance is not available on rental properties, you need to pay a 20% down payment for properties like Perth rent and Taree rent.
7. Beware of High-Interest Rates.
The cost of borrowing money in 2021 can seem cheaper, but the interest rate on an investment property like Strathfield rent or Perth rent will be greater than any primary residence. It is because the lender is taking a higher risk with an investment property. So, if you decide to invest your finance, you need a low mortgage payment that will not eat your monthly income.
8. Calculate Operating Expenses.
Operating expenses on your new property, for example, rental Sydney, will range between 35% to 80% of your gross operating income. For an easy calculation, use the 50% rule. For example, if your rent is $2,000 per month, expect to pay $1,000 in expenses.
9. Invest in A Low-Cost Home.
If you are buying a rental property for the first time, it is advisable to invest in a home that is under $150,000. If you ask why then the answer will be, an expensive house will require you to spend more on the expenses over time.
You can get low-cost properties for Taree rent or rental Sydney.
10. Avoid a Fixer-Upper.
The idea of buying a house, repairing it and then quickly selling it may seem a good idea, but flipping is not a convenient option for you if you are new to this. If you do not have a contractor, or you are not an experienced house flipper who does quality work at a cheap rate, you will end up paying more money to renovate. Instead, look for a Strathfield rent or Perth rent property that is below the market price and needs only minor repairs.
11. Determine Your Return.
What is your return on every dollar you invest? It may be 7.5% for stocks, 4.5% for bonds, and for a newbie landlord, if it is 6%, then you have a healthy place to start and expect to grow. Strathfield rent and rental Sydney properties have good returns.
12. Calculate Your Margins.
It is advisable to set a goal of making a return of 10%. Estimate that maintenance costs at 1% of the property value annually and other costs including insurance, taxes and monthly expenses like pest control, landscaping, association fees, etc.
13. Work with a Property Management Company.
It takes time, effort and emotional labour to be a landlord. Hire a property management company to make things easier for you. They will manage all your tasks professionally, even picking up those 2 AM phone calls for you. Make sure to look around to get the best deal from the best company. They will help you in finding and dealing with the best Taree rent property too.
Now that you have read all the 13 tips to buy your first rental property, you are halfway prepared to buy a property. Your experience will fully prepare you to be an expert in buying rental properties.
