Renting or leasing a property is a good way to expand your pocket. However, in the course of doing so, we tend to make mistakes that haunt us for life. These mistakes are common and easy to spot once you understand a few things.
LOCATION OF THE PROPERTY
The foremost and for me, the most important thing to consider in your journey to becoming a landlord is the location of the property to be purchased. This determines in the long run if you will make a profit or a loss. This also influences short-run returns too (i.e. is if you will make your profit in a short period of time).
Location determines the kind of tenants that are attracted to a property and what your vacancy rate will be. For example, properties in Ikoyi and Ikorodu will attract different kinds of tenants and their vacancy rates will most definitely differ. Other real estate properties such as markets, credible businesses and offices, schools, religious houses, etc. and your property’s proximity to such will also affect its viability in terms of ROI.
These are some of the necessary factors to be considered with regards to location when thinking of investing in a rental property.
TYPE OF PROPERTY
The kind of tenants you want to attract determines the kind of property you would want to invest in. Some people want to rent only to families and not singles. These kinds would need to ensure they invest in family-sized apartments. Those who don’t mind having singles as tenants go for both bachelor pads and family-sized pads. With certain tenants, certain considerations will also need to be made.
For example, for family-sized apartments, you will need to consider proximity to schools, how good these schools are, religious houses, institutions that families might not want around such as bars, joints or clubs, etc. For singles or students, it would be different. In addition to the type of property determining the kinds of tenants, it will also affect the number of repairs you might have to be carried out on such properties. For example, kids, students are more likely to destroy things than singles and families with grown children.
The aim of buying a rental property is to get tenants into it. People will only pay for benefits. No one wants to spend money on discomfort. So you need to consider how your property benefits your intended tenant. The comfort of an apartment is in the social amenities.
These are not just what is available in the apartment like water, good drainage, electricity etc. but also road network, state of the roads (especially during the rainy season), ease of transportation access, bus stops, etc. So endeavor to find out where a blend of these social amenities exist in a city and invest there. Those are tenant magnets.
Another extremely important consideration in investing in rental properties is the security of the environment where the property is located. Nobody rents an apartment where crime is rampant (unless you are the crime or crazy or both). Asking the Police or getting such information from residents in an area can give you quite a great idea of the crime rate of that area.
Also, find out if there is a neighborhood watch or if the presence of law enforcement is readily available in the area. That should give some semblance on the security of the area before you invest in it.
Lastly, the “sweet in the middle” is the rent to be charged. Charge too high and your apartment will be vacant. Charge too low and you lose money. So you will need to find out the average rent being paid by tenants in that area and then calculate what the returns will be and how they will be able to cater for the expenses on the property such as taxes, mortgage, repairs, etc.
Let’s face it, you might not have all accommodations in your property rented out every time. So also factor in the allowances for vacant spots in your apartment into your rent.
These are the most important features to look out for when looking to invest in a rental property. Before investing in that property to rent always research about the location, rent in the area, security (crime rate), and social amenities.