Buying a rental property could be an incredible investment opportunity, however, it’s important to make a well-informed decision before investing, as it is not for everyone. Although investing in a rental property provides many benefits, such as a potential extra income, and a way of paying off the property, it poses certain risks as well.
The following should be considered when deciding whether or not to invest in a rental property:
1.Calculate the upfront costs:
When you purchase a property, there are several upfront costs that would need to be paid. These include bond costs, attorney fees, bank initiation fees and transfer duty. You need to be fully financially prepared before investing in a rental property. In the case of applying for a bond, your financial circumstances will be taken into account, as a means of determining whether or not you will be able to service a loan.
2.Calculate the ongoing costs:
After the property has been purchased, there are several ongoing costs that need to be considered. These costs include rates and taxes, insurance and maintenance.
3.Vacant rental properties:
If your rental property is empty for a period of time, you need to ensure that you have the funds to cover the costs of your rental property. You cannot depend on your rental property generating an income 24/7.
The amount of rent you can charge your tenant per month will depend on factors such as property type, amenities, etc. This should play a vital role in your decision when buying a rental property.