6 Key Factors to Consider Before Investing in a Rental Property


If you are in a position to do so, purchasing a home to rent out can be a great investment and a source of income for years to come. Whether you purchase a small apartment or a large home, you can rest assured that the rental market these days is huge, and you’ll always be able to find suitable tenants to fill the space. However, before you purchase a home as a buy-to-rent investment property, there are several factors that you will need to take into consideration in order to ensure that you stay financially safe and are able to get the best return on the money that you have paid in. In this article, we’ve put together some of the main factors to consider before you invest in real estate to rent out.

#1. Demand for Rent:

First of all, you’ll need to consider the area that you are considering to buy a property in and look at the demand there for rental properties. Some areas have more demand than others; there are always going to be areas where the demographic and general population are in more of a position to buy their own home, so you can expect the demand for rent to be less. Before you look for an investment property, it’s a wise idea to conduct some market research in various areas to see where you are better off spending your money. Remember; the demand is the most important key factor here and this could lead you to purchasing a property in an area where you would not choose to live yourself.

#2. Is the House Rentable:

You may find a great bargain, but ask yourself the question – is this house rentable? With more and more people today choosing renting over buying their home, it’s important to them that they are at least able to find a property that they like, that provides all the amenities that they would expect from a home, and that they can simply feel at home in. Many tenants today are looking for a long-term property that they can call home for themselves and their families. Before committing to buying a property, you should first ensure that it is appealing as a rental home. To do this, it’s a wise idea to conduct some market analysis – look at similar rental properties in the area to see how the home that you’re planning to purchase matches up.

#3. Understanding the Law:

Before you invest in a rental property, one of the most important things to know is whether or not the law in the area allows homeowners to rent out their properties. As a real estate investor, you will want to be sure that you are conducting your investment in such a way that is in line with legal requirements. Ensure that before you purchase a rental property, you are able to put together a legally compliant tenancy agreement in regards to issues such as rent collections, inspections, and terminations. The best way to do this is to research the Residential Tenancy Act and ensure that you have a basic understanding of it before you begin.

#4. Costs and Fees:

Another issue that is wise to research before you begin is that of costs and fees for renting out your investment property. Bear in mind that there may be several fees that you will be required to cover before you can start to make an income from your investment. For example, if you are considering using a real estate agent to find tenants for your property, be aware of the fees that they charge for doing so – this will be even more if you are also asking them to manage the property for you. Property management fees tend to cover the cost of maintenance, rent collections, and much more on top of getting the tenant into the property for you. Doing this yourself can save you some money, but you’ll need to be prepared to pay for advertising and running background checks on potential tenants at the very least.

#5. Finding Tenants:

Once you have found a suitable investment property, the next step is to find a tenant that you can trust – which is a process that’s easier said than done in most cases. The last thing that you want is for a tenant to ruin the property that you’ve worked so hard to obtain, so it’s important to put a lot of effort into finding a tenant who you can rely on to look after your house. In addition, without tenants you will be losing the rental income, so it’s important to be sure that you can find somebody to fill it as quickly as possible. Never rent out your home to just anybody who fills out the application – it’s a wise idea to meet with the tenant beforehand, ask for past references, and conduct a background check to make sure that your tenant has no criminal history and is able to afford the asking rent each month. Ask for proof of income and anything else that you feel is essential.

#6. Selling the Home:

After some time, you may decide that selling the home is the best way to get the return on investment that you need, particularly if the property value in the area rises. If you are renting out the home at the time, there are several factors that you will need to consider. Check out this guide to selling a house with tenants if you are unsure on what steps you need to take in order to do so legally – usually, you will need to give your tenants several months’ notice and provide them with references so that they can easily find somewhere else to live. If you think that selling the home may be an option for you in the future, you should stipulate this in the lease agreement so that tenants are aware that they may be asked to move for a sale. In addition, you might want to consider providing your tenants with the first option of purchasing the house or entering into a rent-to-buy agreement with you.

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