Real estate is one of the most lucrative industries that investors may choose. The industry has produced a lot of very wealthy individuals around the globe and that proves that property is a very wise investment decision. However, just like with any investment, things aren’t that simple and clear once you have jumped in.
To profit from this industry, you need to understand fully before buying first rental property. As the industry requires a significant amount of money, you need to be fully aware of what you are getting into. How is the inside view of this industry if you would like to invest in it as a student?
Here are ten tips for buying your first rental property as a student.
Have a maintenance plan in place
Buying rental property isn’t always about the profit you will make but there are other aspects involved in it like maintenance. The property needs to be maintained to prevent it to fall into an appalling condition; that is your responsibility as a landlord.
These are tedious and time-taking tasks and as a student, you might need to get essay writing help while you go through the process. Online writers will ease your burden with quality thesis, dissertation and essays delivered on time.
Settle all outstanding personal debt
When you are buying your rental house, ensure that you don’t have any personal debt outstanding because it will ruin the investment portfolio you’re building.
If you are burdened by student debt or other liabilities, buying rental accommodation may not be the best move. Buying rental property will add additional debt to you and that’s why you have to be debt-free.
Buy valuable property
You need to think about the property you will acquire when buying first rental property. Probably you thought of buying a large property and repurposing it by designing apartment for students to live in. In whatever case, don’t buy a property that will need major renovations or new construction.
Get the down payment sorted
Buying rental property for student accommodation purposes or regular renting will require a large down payment. A 20% mortgage is the least you can secure as a down payment because insurance is not available for investment loans. It may be hassle securing it but it is a necessary step to proceed with the purchase.
Be fully aware of the interest rate
The interest rate on an investment property will be generally higher and because of that, you need to ensure that you are not paying too much. Compare all interest rates that are made available to you for this purpose because you wouldn’t want a higher percentage that would dig into your profits.
Calculate all the margins
The margins should all be calculated of the net and gross revenue you will make. Take into consideration the maintenance costs and other related expenses. The margin of those costs can be put at 1% of the value of the property. The overall returns that they should expect are 10% annually, with all margins considered.
Calculate the operation expenses
The monthly operational expenses that include all overheads and should be calculated and estimated realistically. Generally, most rental property requires usually 40% of the rent received. However, you should budget for at least 50% of the rental fee.
Calculate the profit you will make
Apart from all the other calculations that you need to make outlined above, you need to calculate the actual profit that you will make. A 6% return in the first annum is the profit that you can make but this figure is based on historical data and depends on a case-by-case basis.
You can leverage the profit you make by expanding when the time is right, but remember that the profit you will make it entry-level.
Don’t go expensive
An expensive house comes with higher maintenance costs and other ongoing expenses involved in running a rental property. That is why property experts don’t recommend going for the most expensive house on the block but the worst. Buy a house that is undervalued that just needs minor renovations to save costs and not set yourself for a lot of initial work.
Location is very important
When choosing a profitable rental property location, search for a place that doesn’t have exorbitant property taxes. However, also remember that it needs to be close to a school and amenities such as malls, parks, and restaurants. Also, look into the future prospects of that area, is it developing and promising more jobs? If so, that’s a prime location.
The bottom line
Rental property investment can be a wise decision to make and is a great way to make more profit. For students, it can be a great side business because it only requires your attention when you need to do repairs or maintenance. However, it is not easy getting it off from the ground, but once it is up and running, the effort becomes all worthwhile.
Remember to clear all debt before going into this industry and securing a down payment enough to apply for a loan. Also, don’t pay too much on renovation costs and interest rates but try and be cost-effective in both respects.
Connie Elser is an online tutor working with international students to equip them with competitive skills that can help them get into top universities. Her work area includes interview preparation, English language, admission essays and logical reasoning. In her free time, she watches movies, reads fiction and goes for long walks.