What I Wish I Knew Before Buying Rental Property

You consider to purchase a property to rent out? Buy to let can be an interesting investment. In this article we dedicate on the factors you need to take if you are considering to buy a property to rent out.

Why buy to let?
“Everyone needs somewhere to live”. With this wisdom in mind is immediately clear why people their money partly “investing in stone” or buy an investment property: the renting out a property delivers the owner rental income (= return) on. The rental market is good: private individuals hire during different phases in their life a House, for example during their study (student housing), if they are just going to work (home), if they don’t buy powerful enough to own property buying (social housing) , if they want to stay flexible living, if they work, for example, temporarily in Netherlands (expat property), and so on. The reasons for choosing a rental property are endless, making the rental market in the last few decades a without prejudice to good investment is proven.

Buy to let pays off: a quick calculation
Who in the past has swapped for a rental property sale House know that the mortgage may be more profitable than rent charges: If you have the financial capacity has to get a mortgage, you pay less per month and you’ll get more in return (for example, a larger or more luxurious House). This is partly because the property values by the financial crisis, mortgage rates have dropped substantially and because the Government long time home ownership has for example, the mortgage interest deduction. A quick calculation shows that if your mortgage repayments are lower than the rent a tenant pays, a positive return can be achieved! This is the reason why many people invest in real estate.

Considerations of investment property to buy to let

As a potential buyer of an investment property, you need to consider a number of issues, including the following:

Who invests in real estate investing, typically with a long-term horizon: by all kinds of purchase costs such as costs and commissions for the broker, mortgage lender and notary state your investment immediately after purchase “under water”. It can take years before you have earned these costs back. Who wants to make quick money (or lose) can be no better real estate investor.

The return of an investment property is initially in the rental income, not necessarily in the value development. Rental income are usually predictable and deliver cash flow; the value development is by definition unpredictable and can be positive or negative. See the possible value development as a bonus, not as the way to make money (because almost no one buys at the lowest point and sells at the highest point …).

Like all other forms of investing, you need to do a lot of research and reliable advice before you do: are you familiar with an investment for example, things like the leasehold and annual canon, the influence of the owners Association or the Foundation classes?

Real estate usually provides a relatively stable return on that historically between 3-6%. By a more active way of exploiting (short stay) can that amount to a gross return of 10 to 15% (NET ca. 7-10%, depending on how the investment is financed). Real estate is seen as a relatively safe investment and usually provides a safe return on; However, no expected double-digit growth year after year.

Real estate requires maintenance: both the outside and the Interior is regularly to maintenance or replacement. These costs, together with owners taxes, express the efficiency somewhat. Know in advance what you buy, what state it is and create a maintenance assessment.

Rental possibilities

The rental of an investment property is the most important criterion to determine if an investment is worth it, after all: the rental income determine the return. Here, too, plays a number of factors, including:

Location: the better the location, the better the rental. An apartment in a big city rents out better than a cottage in a village as the demand for housing in the city is higher. On city level can demand by district or area differences: Centre locations and trendy neighborhoods generally better than the less central lying areas.

Quality: a good quality apartment sells itself. So make sure that you buy and a well maintained apartment for rent aanbiedtsnell.

Furnished versus upholstered: would you like to rent out your apartment furnished so that a tenant can take up residence in there directly, or the tenant must bring his own stuff? In the first case you can benefit from higher income but you also have to do with extra depreciation. Make sure you know the rental needs of your tenants, for example, if you know you want to focus on needs of our tenants.

Legislation: inquire about the local rules. In every city there are different rules for short rentals and long rental. Short rental is from an efficiency perspective much more interesting but can be limited by the local municipality; at long rental builds a resident tenants rights on and you lose flexibility.

Financing

Banks have become more critical with regard to the financing of investment objects: it is nowadays not uncommon to 40-60% to own resources. On the other hand, a mortgage extra returns through leverage: the return on inlaid ability improves with a mortgage.

Finally,

In addition to things mentioned above there may still be other factors play a role: for example, do you want your home itself partly inhabit? Then you need to look for a rental solution that fits here. Do you live away from your investment property and you need to outsource their management? Find a reliable administrator.

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