As you’ve got your own home for a few years now and your budget seems to be improving, you think that maybe the time is right to buy an investment (buy-to-let) property. As exciting and profitable as real estate investment can be, you need to be aware of a few issues and not stumble unprepared into this investment vehicle.
There is always an amount of risk involved, whether it’s periods of vacancy, unexpected maintenance, or destructive tenants. You need to know beforehand how you are going to minimize or deal with these issues.
Owner’s responsibilities: You cannot buy a property and expect that the rental agent and tenant will assume all the responsibilities. Properties, and even more so at the coast, constantly need maintenance and repairs. Hinges rust, paint peels, geysers burst, etc. These things have no reflection on how the tenants live and expenses cannot be charged to them.
Your investment will demand time from you. Although appointing a reliable rental agent will reduce the time you spend on “working” your investment, you cannot ignore the matter altogether. Tenants vacate, markets change, neighbours fight and renovations become due.
Make sure that you have a few dollars to spare on your cash flow. Before you commit, do realistic projections by using conservative income figures and liberal expense amounts. Provide for periods of vacancy, rental commission for agents, rates & taxes, or levies, etc.
Property investment (as opposed to speculating) is for the long haul. Over time you will benefit from your property investment as the value should increase and the outstanding loan should come down. The difference between the property value and the loan amount will reflect the growth in your equity or investment.
