Important Considerations For Landlords Before Investing in a New Property

As a landlord, it’s crucial that you find the right properties.

You want to be certain that your money is being spent effectively in your investments so that you can maximize your profits and grow a reputable business.

Picking the right properties isn’t as simple as it sounds. As much as looks are important, you also need to consider the locational and structural aspects of each property before you spend your money.

No matter what type of property you’re looking to invest in, there are certain considerations that you’ll need to take before spending your money. But if you’re a new landlord or you’re looking to invest in a new type of property that you’re unfamiliar with, it can be hard knowing what these considerations actually are.

Search For The Right Location

Location is one of the most important factors when you’re investing in property.

The area of a property makes a huge difference in whether or not people will want to live there. You could have the most beautiful property available for rent, but if the area has a poor reputation, you might struggle to find tenants.

When you’re searching for the right location, consider whether the area is upcoming or not. Upcoming areas are those that have a promising future. Maybe there are plans to build a lot more houses and entertainment facilities nearby, or maybe the crime rate has been steadily dropping for years.

The idea behind investing in a property is to find locations that are expected to evolve over time. This way, your investment results in a net positive gain, and the property’s value slowly increases during the time that you own it.

Find The Right Properties

Once you’ve found an area that is on the ‘up’, you then need to put your efforts into finding the right housing.

Search for properties that are near to the local amenities or parks, or those that have plenty of parking space and scenic views. These are often the factors that tenants are looking out for when they’re searching for a new property to rent.

Before you invest in any property, you should always take time to learn more about the neighbors. You can use public records search companies, such as US Search to access public information about those that live in the area where you’re investing.

US Search and similar companies have a database full of billions of public records. With a quick search, you can find out the names, contact details, and criminal backgrounds of the people that live next door to the property you’re buying.

This information might sound irrelevant to you as the landlord, since you won’t be actually be living in the property. But having noisy or intimidating neighbors can cause you more trouble than you first anticipated. They can drive great tenants away and negatively affect your business.

Determine Your Budgets and Costs

When you’re investing, it’s all about the numbers. You will need to determine your total budget and your expected ongoing expenses before you make any purchases so that you don’t end up overspending.

When you’re buying a property to rent and you need a buy-to-let mortgage, you will require a down payment of at least 20% of the property’s total value. Even if you have the money to pay for the property in cash, you’ll still need to factor in the legal costs, such as valuation fees and surveyor fees.

Create a large spreadsheet that details your predicted cash flow and profit margins. You want a positive cash flow to see a great return on your investment.

As you create your budget spreadsheet, you will need to take the following factors into consideration. Each one of these factors can significantly affect your revenue and expenses.

• Expected rental income
• Expected increase or decrease in the property’s value (appreciation or depreciation)
• Expected property taxes and monthly fees (such as mortgage costs or loans, including associated interest rates)
• Emergency funds for unexpected costs

Be Aware of Any Legal Requirements

As a landlord, there are a range of rules and regulations that you need to follow.

The rules around buying to live in the property and buying to rent it are completely different. Before you invest in any property, you must ensure that you are complying with every legal requirement.

Some of your legal requirements as a landlord are the following:

• You must have landlord’s insurance
• You must have valid gas and electricity certificates
• You need to have a certificate to show the property is safe to live in

You’ll also need to check for any covenant restrictions. These are restrictions that get placed on a property by the developer to prevent alterations from being made to the construction of the surrounding land.

It’s important to know what you can and can’t change as the owner of the property if you don’t own the land. This will depend on whether you’ve bought a freehold property or a leasehold property.

In a freehold property, you own the land that the property has been built on. In these cases, you’re less likely to run into restrictions.

Find Great Tenants

As a landlord, you have two options. You can either work with an estate agent who will help you to find the ideal tenants and will also communicate with the tenants on your behalf. Or you can skip this step, and deal with your tenants directly.

Both options have their advantages and disadvantages. If you want to save time and hassle, connecting with an estate agent is a great idea. If you’d rather maximize your profits and you don’t mind interacting directly with your tenants, you might be better off organizing things yourself.

Regardless of which method you choose, you should always perform the necessary background checks to ensure you find great tenants. You want people who are going to be as reliable and trouble-free as possible!