Category Investment

Do you want to buy a property to rent out? If so, you’re not on your own. These days, a lot of people want to get into renting out homes, and for good reason: it can be a very profitable investment. But buying a rental property isn’t as easy as just picking one out and paying for it. Before making such an important purchase, there are many things to think about. In this blog post, we’ll talk about some tips from experts that will help you buy a property to rent out. Let’s get started.

Get The Right Mortgage

Get a good mortgage if you want to buy a property to rent out. This is especially important if you plan to get a loan to help pay for the house. There are many different kinds of mortgages, and they are not all the same. Before making a choice, you should look around and compare prices.

Also, it’s important to make sure you can pay the mortgage payments. This is especially true if you want to be a hands-off landlord and employ a property management business to take care of every aspect for you. Remember that you will still have to pay your mortgage every month, even though you will be getting rent.

Location Is Important

When you buy a property to rent out, you will want to think about where it is. After all, the only reason to own a rental property is to rent it out. And if you want people to rent your house, it needs to be in a good place. If you don’t, it might be hard to find (and keep) tenants.

Before you buy a rental property, you should think carefully about where it will be. You should think about the neighbourhood, schools, and public transportation in the area. The easier it will be to find and keep tenants, the more desirable the area.

Know About Additional Expenses

When you buy a property to rent out, it’s important to remember that sometimes you’ll have to pay for things that you didn’t expect. This is just one of the things that come with being a landlord. As a landlord, there are many things that can cost you money, from repairs to empty units.

It is important to be ready for these unplanned costs. One way to do this is to put some money away each month in a contingency fund. When an unexpected cost comes up, you will have the money to pay for it without taking money from your other sources of income.

Do you plan to invest in rental property? If that’s the case, you’re definitely not alone. It’s no secret that buying a rental property and managing it can be a lucrative business venture, so it’s no surprise that so many people are eager to get into it. However, finding a rental home and giving over your cash is not as easy as it sounds. Many factors should be thought through before making such a substantial investment. In this article, we’ll share some useful information that will make it easier for you to invest in a rental property. 

Get A Good Mortgage When Buying A Rental Property

The importance of securing a decent mortgage cannot be overstated when buying a rental property. If you need a loan to buy the house, this is of paramount importance. All mortgages are not the same, and there are several to choose from. You should look around and get a few quotes before deciding.

In addition, you should check your financial situation to ensure that you can comfortably pay the mortgage. This is especially important if you intend to be a hands-off landlord and instead work with a property management firm. Keep in mind that even though you will be receiving rent each month, you are still responsible for paying the mortgage each month.

Think About The Location

Location is an important factor to consider when investing in a rental property. After all, getting tenants is why you buy a rental property in the first place. Your property’s location is a major factor in determining whether or not renters will be interested in it. Tenants may be hard to come by and keep if you don’t fix these problems.

As a result, it is crucial to give careful consideration to the location of the rental property before making a final decision. Think about accessibility to public transit and nearby schools as well as the safety of the immediate area. It is easier to locate (and keep) tenants when you’re in a more desirable location.

Be Prepared For Unexpected Expenses

An further crucial consideration is the fact that when buying a rental property, unanticipated costs can and will arise. As a landlord, you’ll inevitably face situations like this. As a landlord, you risk losing money due to a variety of factors, such as maintenance and vacancy.

It’s crucial to have a contingency fund in case of such unforeseen costs. One strategy for doing this is to put money aside on a regular basis. You won’t have to take money from your emergency fund or any of your other sources of income to address any unforeseen costs that may arise.

What is your greatest dream? Everyone has a dream, and if yours is to own and run a hotel, you might think that it will always be just that; a dream. However, it could be a possibility if you can secure the financial lending for it. That may sound as though it is easier said than done, but what if you could do it? What if you could realize your dream? It may not be out of reach – here are some of the things a lender will want to see and know before loaning any money to you. Are you ready to take the next step? 

Your Costs 

Of course, the most important thing that a lender will want to know is the costs involved. There is the initial purchase, but there are also many ongoing costs such as hotel linen, cleaning, staff, food, entertainment, security, a website, marketing, and so much more. You need to be able to show that you have thought about them all and understand the outgoings. You also need to have calculated potential income so that you can offset the figures against one another and come up with the profit that you are hoping to make. 

As well as this, you should consider whether any changes or improvements will need to be made – this is especially true if you are buying an older property or if you are buying a building that has not been used as a hotel before. 

A business plan will help you with all of this when you want to buy a hotel. Most companies, including the hotel industry, cannot thrive in an internet age without a sound marketing plan. Relying on recurring business is not regarded as a viable long-term strategy, and lenders would be wary if this were the case.

The Initial Down Payment 

It is highly unlikely that any lender will pay you one hundred percent of what you need to buy the hotel in the first place. Instead, they will lend you a smaller percentage, and you will need to pay a down payment to cover the rest. This is standard practice and is the same as buying any property, except that the down payment for a hotel is sure to be substantially higher. 

The money can come from your savings, a remortgage on your home, or you could speak to friends and family to help you. It might even be possible to raise money through crowdfunding or by finding an angel investor. Selling a current business to pay for a new one could be a risky strategy, but if you can sell it for a larger sum than you need for the hotel, you will have money to live off while the new business grows. 

Hotel Experience 

In many cases, a lender will want to see that you have previous hotel experience before you buy a hotel. They will want to know that you can run a hotel efficiently and that you already understand exactly what it takes. If you do have previous experience, perhaps because you worked as a hotel manager in the past, this is an easy box to tick, but if you are starting fresh, what can you do? 

The best thing to do is to have a good manager on board. If you can show that you already have an experienced person ready to start work and provide evidence to the lender that they have been successful in the past, they will be more likely to lend. 

A Suitable Property 

The lender will also want to know as much about the property you are hoping to buy as you can tell them. Is it in good repair? Is it in a good location? What has it been used for previously? Explaining all of this and determining exactly why you feel it would be a good choice to become a successful hotel will help them make their all-important decision. 

The location of any hospitality or tourist firm will be critical to its success when you buy a hotel. A lender will look more favorably on a hotel company seeking financing if its proximity (for example, near transportation hubs, office buildings, and entertainment centers) is recognized as a key factor in affecting its profitability.

Occupancy Rates 

The profitability of a hotel is heavily reliant on occupancy rates. If revenue per available room (RevPAR) and average daily rates (ADR) are high, this will undoubtedly benefit lenders.

If you are purchasing an established hotel company whose RevPAR is presently lower than it should be, a lender will want to know what your business strategy is to increase this number in order to increase the hotel’s profitability. 

If you have bought an investment property, then you will want it to be rented out as soon as it is ready, otherwise you will be losing money. Here are some of the best ways to ensure that you can rent out your investment property quickly and that you find the right tenant at the same time. 

Research The Market 

Something that will put prospective tenants off choosing your property to live in, or even view, is the price. You may have a rent in mind that you want to achieve, but that doesn’t mean that price will be possible. You need to check to see what else is available in your area and compare those properties to your own. Find as many similar houses or flats as you can and note the rents they are asking for. This way, you can get a good idea of what you might be able to achieve. Be prepared to be flexible though when you want to rent out your investment property, as you may need to reduce your price over time or take an offer if you think it can work for you. 

Work Out The Costs 

Once you know how much rent you are likely to achieve, you should work out all the costs. For example, depending on your situation, you may be taxed on your rental income, which would be at 20 percent (or 40 percent for higher earners). This can make a big difference to your profit. There will be other costs associated with the property as well, such as the mortgage (if you have one), landlord’s insurance, and the cost of maintenance. If the rent you could get won’t cover these costs, you may need to look at alternatives such as selling the property or converting it into a multiple occupancy property that you can charge for by the room rather than as a whole. 

Advertise 

Unless people know that your property is up for rent, they won’t ask to see it. Therefore, you need to do as much as possible to advertise it if you want to rent out your investment property. If you choose to go with a lettings agent, they will do this for you, but of course they will also charge. If you prefer to do everything yourself, you can use social media to your advantage to begin with. You can share the details of your property and ensure that as many people see it as possible by boosting the posts to your chosen audience. You can use presentation software to put together all the benefits of renting your particular property so that prospective tenants can see everything they need to before contacting you. This saves you (and them) time because only those who are really interested in the property will need to see it. 

Local press can also be a helpful way to advertise your property, as can word of mouth. Really, the more ways you can promote it, the better, as the right tenant will spot it quickly, and you will be able to move them in sooner. 

Get Insurance 

Although the tenant will deal with the contents insurance, since you are the property owner, you will need to organise buildings insurance. You will also need landlord’s insurance. Landlord’s insurance is in place to protect you from non-paying tenants, for example, and will ensure that you don’t lose money in the long term. 

Typically, investors strive to buy properties for below market value (BMV). Paying less for homes can play a significant role in determining how profitable investment property is. Unfortunately, in an increasingly digital and open world, purchasing a home below market value is becoming progressively impossible.

Investors who want to maximise their returns on their investment property must master the art of negotiating. Experienced landlords and investors will aim to bargain in order to purchase properties at the lowest possible price. Such investors can purchase properties at or below market value by haggling the price down as much as feasible.

Unfortunately, the art of negotiating does not come readily to many people. If you are one of these folks, here are some useful tips for buying an investment property at a good price.

Know Your Seller

Negotiating without first knowing the seller’s motivations might be a recipe for disaster. When viewing a property, try to schedule a viewing with the owner in attendance. If not, take the time to get to know the selling agent. It is critical to understand why the owner is selling the property and how this may influence their selections.

When seeing the home with an agent, ask if you may speak directly to the seller before submitting an offer. The opportunity to communicate directly with sellers and develop a connection will enable you to discover more about their goals and ambitions. If there are numerous purchasers, you may be the only one with whom they are directly communicating, giving you an advantage.

Let The Seller Make The First Move

Making the seller move first can be advantageous. After you’ve established a connection with the owner or agency and persuaded them that you’re a serious buyer, it’s occasionally worthwhile to ask the seller what they’d genuinely sell the home for. By doing so, you are requesting that the seller reconsider the price they are willing to accept for the property. In most cases, they will reconfirm the list price. They may, however, return with a cheaper price, in which case the goalposts will have already shifted in your favour.

Look For Emotional Anchors

Anchors are used by negotiators to reframe a seller’s perspective. A seller may have a specific price in mind, but if you start with an unexpectedly low offer – preferably one supported by a historical comparison – you can utilise this to subliminally peg their expectations to a lower value. Simply said, a low offer that is shockingly low can cause sellers to reconsider their own value assumptions. You must exercise caution not to make an insultingly low offer. Making an offer that is 20-25 percent below the advertised price, on the other hand, might be a beneficial approach when attempting to negotiate a lower price.

Establish A Range

Rather than selecting a precise anchor point, establishing an emotional range might be beneficial. Instead of making a single low offer, which might put sellers on the defensive, you can make a variety of offers. While their house is advertised for £150,000, other residences in the neighbourhood have sold for £120,000 to £140,000. The seller will still accept the lower end of the range, but making an offer as part of a range will make it more appealing.

Don’t Use Monetary Terms

While most individuals are motivated by the exact selling price, it is not often the sole consideration for sellers. You may utilise this to your advantage if you understand the vendor and what they want to achieve. If they want to relocate but haven’t located the appropriate property yet, you might offer to rent the house to them for a year with a one-month break clause. If they are purchasing a home that needs renovation, offer to put them in contact with a reputable builder you know. In every case, look for ways to offer non-monetary value. When you do this, the seller will see that you are making every effort to provide them a bargain that works for them.

Use Odd Numbers

Precision is provided by odd numbers. When making bids for an investment property, buyers tend to round up to the next thousand. People frequently become fixated on much bigger rounds than this, gravitating for offers to the closest £5,000 or £10,000. The issue is that this encourages vendors to push you to the next rounded offer.

Consider making an out-of-the-ordinary offer as you approach your price limit. Instead of rounding up to £200,000, offer £196,493, for example. The accuracy of this amount can disarm salespeople and persuade them that you have reached your financial limit, deterring them from asking for more. Such offers can be particularly successful when accompanied by an investment statistic.

Give The Seller Control – In Part

It is human nature to feel more at ease when you have control over a situation. Surprisingly, this can be a valuable bargaining weapon for purchasers. Buyers can obtain the results they seek by asking calibrated questions rather than delivering replies. Ask the seller questions that make them feel in control of the discussion while also encouraging them to come up with ideas that benefit you.

If you hit a pricing stalemate, ask the seller, “How can we work together to bring this deal over the line?” Similarly, if the seller appears to be fixed on a specific price, inquire as to why that price is so essential to them. The idea is to get the vendor to feel empathy for you and come up with their own solutions.

When employing calibrated inquiries, avoid starting queries with the word “why,” unless you want the seller to defend an objective that benefits you. The word ‘why’ sounds accusatory and puts sellers on the defensive.

Think About Timing

It may be tough to strike the right balance when it comes to making an offer on an investment property. On the one hand, you don’t want to reply too soon since it would confirm the idea that you were always willing to boost your offer. On the other hand, you don’t want to wait too long because it may indicate indifference or allow other bidders to outbid you.

When negotiating, never reply with a counteroffer right away. Instead, inform the seller or agent that you will examine the offer and will need to double-check the maths before responding. Provide a timetable for when you will respond to them. If you are at work, say you will verify the figures when you get home and respond first thing the next morning.

When you receive a counteroffer, you should use the call to express concerns or questions if the price is too high. You should not reject the offer right away. Instead, you might say that it may be tough for you to achieve that amount or that the counteroffer remains rather high.

Use A Surveyor

When you have an accepted offer, you can make it contingent on a building survey. The advantage of doing so is twofold. To begin, having a trained surveyor examine the property will aid in identifying any structural concerns or expenses. Even the finest negotiators will be out of cash if the home is discovered to have severe structural concerns. Second, if small faults emerge, you may use this knowledge to return to the vendor and negotiate a cheaper price.

Walk Away If You Need To

The goal of being a landlord in the cold light of day is to make money. You must buy properties that will provide a significant rental income or capital growth to justify the time you will invest in them. If not, what is the point of devoting so much time and money to the project?

Buyers frequently make the mistake of becoming emotionally engaged in an investment property. You may have non-financial motives for wanting the transaction to go forward for one reason or another. When this is the case, you are more likely to overspend and make an expensive mistake. Calculate the projected return on the property before making an offer. Calculate the price at which you will need to buy the property in order to achieve your goal return and set it as your maximum price. If the discussions go above this amount, you should be firm and walk away.