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Being a landlord definitely isn’t for everyone, but it’s still a consideration that many make. It could be a smart way to grow your wealth because the demand for rental properties continues to be strong. It’s the most common way of people stepping into having their own place to call home. While the number of homeowners has dropped the rental market grows. It’s in no way a quick fix to becoming rich though, it’s more of a long-term investment.
It’s something that requires careful consideration but if you think it’s something for you to take a lot at the steps below to help you on your way:
It Should Be Considered A Business
Being a private homeowner and a landlord is completely different. It’s classed as a business and this means you need to treat it as one. Often people who are trying to become landlords fail because they don’t see it as a business, you still need to make considerations as though you are a business and this means building a business plan. This type of business involves skills, time and requires you to be hands-on. Any property that you consider purchasing needs to make sense business-wise and you shouldn’t look at it as a house you’re going to live in. This means taking away personalisation and creating somewhere that is viable as a rented property. This also means that it needs to be reasonably priced in order for you to be appealing to tenants. You also need to be in the position to apply for and be accept for a buy to let mortgage so it could be a good idea to use a Mortgage Broker. The lending requirements are different from private dwellings so it’s important to do your research. Often the down payments are much higher and they work in a slightly different way.
Starting Small Is Best
You shouldn’t jump straight in the deep end when it comes to becoming a landlord. It’s much better to start small with one or two properties so you can assess how you’re managing them. Once you have a had successful period trading with these then you can add future houses. Also if you start small you will get a better idea of whether this type of business is for you.
Make Sure You Know The Area
Location is key when it comes to rental properties and you’re much more likely to be successful if you start in an area that you already know and understand. If you know nothing about a particular area don’t buy property there until you have completed extensive research. When looking at houses to buy, you might notice a low price that seems too good to be true, however it could be due to the area, higher crime rates or bad schools. Buying in neighbourhoods that you know is the best way to start.
Price Your Rent Right
Rent prices will differ everywhere, so it’s essential you do your research on the local area for prices before you set yours. You don’t want to set them too high and risk losing the custom but you also don’t want to price too low and miss out on potential earnings that way. Local estate agents will be able to give you an accurate value, even if you don’t plan on using them for their services. Knowing how much you’re likely to earn from the rent will allow you the profits you could make after costs are deducted. Often new landlords don’t think about the rent they will receive however, you need to think about this before you get a mortgage, otherwise, you risk being out of pocket. Another thing you need to consider is putting money to one side for maintenance, around five per cent of your rental income should be put to one side for this.
When starting out you may find that it is more financially viable to manage your first properties yourself. Using an agent will incur monthly costs and the more you can reduce this the better. You need to be hands-on when it comes to maintenance, looking for tenants and looking after things such as deposits. It’s a good idea to do some research into what an agent would normally look after for you and decide if this is something you could tackle. If you’re not likely to feel comfortable chasing a tenant for rent then this might not be for you.
These are just a few of the considerations you need to make in order to become a landlord. Are there any others that should be included on the list? Please share them in the comments below.