Since the economic downturn, many investors are turning to property as a way to keep their money safe and generate an additional source of income. Unfortunately, however, many people make rookie mistakes when starting out that can harm their portfolio. As such, consider the three tips below to help you avoid some common pitfalls of buy-to-let properties:
Avoid Buying the Wrong Property at the Wrong Price
Having a sense of business-savvy will go a long way when investing in property. Too many investors become attached to a property they like, paying over the odds and struggling to make that money back. However, remember that a buy-to-let isn't going to be your home for the foreseeable future, so try to remain as objective as possible when weighing up your options.
Another mistake many investors make is choosing a home near to where they live. The reason, they say, is so they are able to keep an eye on the property from a distance. The obvious drawback of this approach is that your area may not be the most lucrative market for low asking prices or high rental yields. As such, consider looking further afield to try and spot some great buys in a neighborhood outside your own.
The key to getting the balance right when investing is to have a clear strategy before searching for a property. Remember that the house or apartment should generate cash flow on a monthly basis, rather than buying simply to sell down the line.
Don't Get the Wrong Tenants
When it comes to property, your tenants are the cornerstone of your investment. Without them, your property would be powerless at generating income. As such, it's important to take some time in choosing the correct tenant to ensure you maximize your income.
This doesn't mean choosing a wealthy tenant and charging them maximum rent. Rather, it means vetting your potential tenants and ensuring you choose one that will be in it for the long term. The biggest risk to any property investor is the void period, where you are left without a tenant and have to pay the mortgage out of your own funds. Therefore, it pays to be a good landlord who builds healthy relationships with their tenants in order to keep them happy.
Regularly maintain the property, deal with tenants' concerns and try not to be too totalitarian with your tenancy requirements. Of course, many landlords won't want smokers or pets living in their property; however, giving a little leeway with your tenants can go a long way in minimizing your risk of an empty house.
Don't Forget to Manage Your Own Income
Always remember, being a landlord is very much like starting up a business. You have to have enough money stocked away for a rainy day, in case of maintenance fees or property upkeep. When developing your portfolio, it pays to keep a close eye on your own outgoings to ensure you have enough spare cash to cover any emergencies.
Additionally, when applying to become a landlord you have the choice to use a letting agent to manage the property on your behalf. Many landlords find this is a great way to delegate routine tasks such as inspection and maintenance, allowing them to focus on further developing their portfolio.
With that said, these letting agents do charge a sizeable fee that will eat into your profit. When starting out on the property ladder, you may find that you are able to juggle being a DIY landlord with your day-to-day life. As your spread grows, however, it is often better to employ an agency to manage your portfolio on your behalf. For more ideas, contact real estate attorneys in your area.
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