Buying a rental property is a good step in the real estate business. However, I would advise that you shouldn’t barge into it without having some knowledge of what you are getting into.
Despite having many people successfully running a rental property, still, it’s not easy money. There are obstacles, losses, risks, etc. but if you can figure it all out, then, you find it a successful investment.
Now, what do you need to know?
1. The property has to fit into what the people around want
This is very crucial. If you are buying a property close to the campus, be rest assured that 95% of potential tenants will be students. If you intend to make it a family home, then, you may find it difficult to get renters who are not students.
If people around are working class with good jobs, this will increase your property value because renters will be ready to buy at a premium price.
You need to put people whose population is higher into consideration before buying a property for rent. If it works, you can go ahead.
2. Location is as important as the air we breathe
If you want to get a good return on your investment, you need to be keen on location. Location can strengthen your investment, and at the same time kill it. It determines what value to be placed on it.
If you buy a rental property, renovate and furnish it in underdeveloped areas, you may be disappointed in hearing the value people place on it.
Also, if your rental property is in a place that is not all that motorable due to bad roads, or the roads always get flooded during heavy rainfall, this may be a huge obstacle to getting renters that would be willing to pay something worthwhile. And what is a business if you are not getting anything from it?
3. Check out the taste of structures within the locality
This should be highly considered because it’s a great determinant of having people interested in your property. Can you afford to have the property renovated up to taste?
The property you are buying is not a new model, it is best to check out for structures around so you can make an adaptation or do something better. This helps you get renters easily and also willing to pay its value.
4. Renting property is dicey
The truth is you can’t be good enough, smart enough, and do everything right. Just a little mistake might make you lose the property. The fault may be or may not even be from the tenants or anyone.
Major damage such as fire outbreaks can ruin your investment. An economic downturn caused by anything, for example, a pandemic may make you lose money because if your tenants are unable to pay or move out without anyone showing interest in occupying, it’s a big loss on your part.
5. You are responsible for maintenance
As much as landlords try to avoid this part but at the end of the day, it falls back to you as the owner of the property. This is where you are reminded that it is your house and the responsibility to keep it together lies with you.
This is a major reason some landlords take maintenance fees from tenants in case there is damage. However, this fee can just cover a little of the damage.
The major repairs still lie with the landlord whether he is willing to or not.
Apart from having damages, maintaining a house is the only means to keep a property whole.
Things have to be checked, adjustments have to be made and repairs have to be done.
All of these rest on the shoulders of the property owner.
6. Get everything documented
Everything about your property has to be documented. One of such is “agreement.” In Nigeria, many people take things for granted which may turn out to be a bigger issue sooner or later.
Some houses have no landlord-tenant agreement for whatever reason. This shouldn’t happen in normal circumstances. When push comes to shove, that agreement which seems like a piece of paper to many might be the only evidence to bail you out.
And all documents concerning tenant evaluation and rent must be considered too