5 Things to Know When Buying Your First Rental Property
Having your name on an ownership contract is a big deal, a real sign you are a grown-up. It comes with various benefits, but responsibilities as well. Real estate is a long term investment, and more and more people are opting for the option of renting their property in the first several years, to cut the costs of a mortgage. This is an especially valid option if you’re living in the land down under nowadays, with the tourism rising and business bringing a lot of people here temporarily. You will need to be smart and well-informed to make profits and save for retirement.
1. Being a landlord 101: reliable, available, and organized!
There are numerous aspects of this position, and as with high power comes great responsibility, you’ll have to stay organized at all times. If you thought that with the signature on the lease, your troubles are over, you couldn’t be more wrong. Being a landlord means people relying on you, counting on you to be in charge of every single problem on the way.
Brace yourself, because the pipes will be rusting, faucets will be leaking, drains will be stuffed, and all the similar problems your tenants might have will become yours. Do not rush into this kind of a commitment, unless you’ve done your research! Predetermined obligations and regulations in the tenancy agreement will help you in some cases. Nevertheless, you should be prepared to be available 24/7 in case of a real emergency.
2. Dealing with people
First, you need to understand the role of a landlord requires a particular set of skills in the range of social intelligence. Dealing with people can be tiring, but it can pay your mortgage. Regardless if you’re renting the place for short terms (AirBnB type) or having more permanent tenants, you’ll meet many challenges on the way. Have you considered the advantages of renting a fully furnished place? Sure, you’ll need to invest more, but this will also have an impact on tenants you’ll be attracting.
The best advice is to set up a place as if you’re doing it for yourself.
Many owners of real estate in Brisbane, for example, are opting for having a mediator in the process, especially in the first couple of years. Which is no doubt a valid option, and it will help you sort many things out. People working in real estate will take care of tours and assist you in setting the criteria for the selection process.
3. Lowering the risks
A solid plan will help you during the process, and being meticulous is essential here. Securing down payments and creating a detailed agreement for your future tenants will enable dealing amicably with numerous cases of disputes. Hear a second opinion, ask for advice and google the most common problems in the relation between a landlord and a tenant.
Create a filing system for your tax records and make sure the rent date is due at least a week before your mortgage deadline is. Specify the method of receiving the rent, and if you choose bank transfers, make an online invoice report with all the details.
4. An agreement is your upper hand
The best advice comes from people who have been dealing with tenants in the past. This step will result in a more detailed and specific agreement your tenants will have to sign, releasing you from the potential disaster of dealing with such instances on the court. It should state:
- The exact procedure in cases such as damage to the property
- The policy towards pets
- Certain items regarding maintenance and early termination of the lease and
- A clause dedicated to illegal activities in the premises.
List of problems
Make a list of all the problems you’ve ever heard of or read about in the living accommodation context. Even the most unusual ones must be included in your contract. It will ensure you stay on top of things at all times. If you want your rental property to be pet-friendly, for example, list the animals that are allowed. You don’t want to end up in a situation where your tenant is legally and technically allowed to have fruit bats.
5. Building a healthy relationship
Communication is the key. Talk with your tenants regularly and listen to their feedback. It will help you establish a trustworthy relationship based on honesty. Furthermore, prevention is always a better solution than dealing with a problem. Provide multiple options for your tenant to reach you and be reasonable with their requests! Give them notice if you plan on visiting the rental property. Think of them as your business partners, and treat them with respect!
All in all, many factors will influence your investment in a rental property. Develop strategies for dealing with issues (and people) and remember, passive income doesn’t imply you are passive quite the contrary! It takes a lot of work and effort, but the returns in profit and a safety net for your mortgage are worth it! Just take precocious measures and plan every step of the way! Make sure you are prepared for a couple of months between the tenants and any unpredictable expenses. Learn from the experience of others, and seek advice whenever possible!
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