What Should You Be Aware of When Looking for a Profitable Rental Property?

rental propertyFrom the very first time you decide to invest real estate to actually purchasing rental property, you have a lot of work cut out for you. For the first-time investor, this might turn out to be a daunting task. Owning property is not easy and the field is full of potential land mines that can easily kill your expected returns. Here is a list of some of the top things you should be aware of when shopping around for an income property.

Before hiring a real estate agent to help you through purchasing a rental property, it is best if you start out on your own. An agent is likely to pressure you into purchasing a property before you have found one that you really like. However, always take an unbiased approach when viewing any neighborhoods and properties within your budget range.

Searching for Property

The range you can invest in will mostly be limited by how much you are willing to put into the property. Other factors that come into play when searching for the right rental property include:

  •  The neighborhood – The quality of the neighborhood you are buying into will influence the type of tenants you get and the number of vacancies you face every year.
  • Schools – Your tenants might have or planning to start a family, so they will require a rental home near decent schools. When you find good properties near a learning institution, make sure that you find out about the quality of education offered there.
  •  The job market – Locations with good employment opportunities tend to attract more tenants. Keep your on the ground, if an area is about to host a major company, you can rest assured that employees will flood the area. However, this is a double-edged sword that can either raise or lower property rent prices depending on the type of company setting up base in the backyard.
  • Rents – Since rental income will be your bread and butter from your rental property, you need to find the average rent prices in that area. If you find that the average rent will not cover for expenses like taxes and your mortgage payments, you need to keep looking.

Get Insider Information

Talk to other renters and homeowners in the neighborhood. Renters are more likely to be more honest when it comes to explaining the negative aspects of their locality since they have no permanent interest in it. If you are set on a certain neighborhood, pay frequent visits at different times of the week to see how your future neighbors live.

Physically Inspect the Property

The best properties to invest in, for beginners, are residential, condominiums or single-family dwellings. Condos are relatively low maintenance since they have the condo association in charge of external repairs, meaning you only have to worry about the interiors. Condos are not truly independent living units and therefore do not get as much rates or as high  appreciation as single-family houses.

The single-family unit attracts long-term renters who are either couples or families. Since these are general arrangements of two adults living together, they are financially stable with promises of fronting their rent regularly. As a potential landlord, you need to locate a property and neighborhood likely to attract this demographic type.

Once you have marked a neighborhood as a potential investment area, look for property with appreciation potential and a healthy cash flow. Compare properties that are beyond your budget with those within your reach. Watch listing prices of nearby properties and ask buyers about the potential final selling price for an educated idea of the market value in a neighborhood.

For appreciation potential, consider the likelihood of attracting better paying tenants into your building by making a few cosmetic changes. This will also help raise the building’s value should you decide to put on the market in a few years.

In terms of cash flow, you have to make do with making an educated guess. Consider the average rent rates in the neighborhood and subtract monthly mortgage payments, property taxes divided by twelve, generous allowance for repairs and maintenance, and your monthly insurance costs. Do not underestimate the repairs and maintenance costs once you have finalized the deal. If figures even out or have a little left over, contact a real estate agent and have him or her submit your offer. If everything goes well, you can now, officially, assume the title landlord.

Conclusion

When you find your ideal property at OUG Parklane for rent on Property Guru, ensure that your finances are healthy and that you keep your expectations realistic. This way you can wait for your property to bring in cash rather than desperately seeking for it. Real estate investment in Malaysia does not start with purchasing the property, but with creating the right financial institution that allows you to buy rental property.

8 Comments

  1. raihanah March 10, 2016
    • saniyunus March 13, 2016
  2. Noriza Rahman March 12, 2016
    • saniyunus March 13, 2016
  3. Tonik Ajaib March 21, 2016
    • saniyunus March 24, 2016
  4. Ikhwan April 12, 2016

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