5 Tips on Buying a Property to Rent


Buying a property to rent might be something you want due to the fact that the real estate has created a lot of wealthy people out there.

You might also think that purchasing a property for rental could be a real investment for the future. However, it could drown you into thousands of dollars of debt and other issues when you do not have enough preparation. So, in this article, we are going to show you 5 important tips before buying a property to rent. It is not impossible to be an estate tycoon in the future, right?

Make sure it is for you

When you are looking for the property to buy, you will see a lot of things in that house. For example, the clogged toilet, a toolbox, or drywall would need to be repaired one day. You need to ask yourself if you will be okay when the issues come and you need to fix it. Some homeowners would repair it themselves in order to save the cost. If you are okay to be a handyman in your own property then you may be suitable to be a landlord.

Pay down your debt

Investors who have been around for years might bring their debt along for their portfolio. However, if you are a beginner and this is your first time to purchase a property to rent then you should not do that. So, if you have medical bills, student loans, or you simply have kids who need to attend college next year then it is better for you to focus on those things first. It is not wise to make payments when you do not have cash.

Pay the down payment

Generally, the investment properties will need a bigger down payment than other owned properties. It is supposed to make the approval requirements with a better stringent. If you can only put 3 percent for the hone you are currently living in, it will not work for an investment. Since mortgage insurance is not available for a rental property, you need to put at least 20 percent.

Higher interests rates may haunt

You may get a low-interest rate right now. However, the interest rates when it comes to the investment property would get higher than another traditional mortgage. Keep in mind that you need a low payment for a mortgage so you can still enjoy your monthly profits too.

Calculate the margins

For your information, the Wall Street firms that purchase distressed properties will need for returns at least 5 percent. They still need to pay their staff too. This is why the individuals will make at least 10%. 

Also, you need to make the estimation for maintenance cost at least 1 percent of the annual value of your property. Other expenses may include insurance cost, the possible fees for homeowners’ association, taxes of your property, and other monthly expenses such as landscaping and pest control. So, those are things you need to consider before buying a property to rent.