You’re drawn to investing in real estate because it’s a reliable and lucrative long-term asset that usually provides investors with a healthy ROI. And, that’s the most important part of investing your money – increasing the odds of adding to the initial investment. At the very least, it’s imperative that you breakeven.
Unfortunately, properties are different, as are the people who look to buy or rent them. Therefore, it’s impossible to say that a single trait will guarantee you a long and successful project that you can add to your portfolio. There isn’t a one-size-fits-all policy.
This puts you in a sticky situation – how are you supposed to know what makes a rental property profitable? With so many to choose from on the market, how can you raise the chances of picking correctly and striking gold? The key is to search for the features that, while they may not be successful one-hundred-percent of the time, are typically reliable indicators.
The more your rental property has, the higher the odds that you’ll always be able to find tenants who are happy to pay the asking price. All you need to do is figure out the characteristics. Here are the top four for your information.
Taxes
According to the saying, death and taxes are the two things that are certain in life, so the latter is something you must consider before signing on the dotted line. As a landlord, most of the expenses will be paid for by the tenant, which is why it’s tempting to gloss over them. After all, you’re not bothered as long as the tenants can pay.
However, it’s worth calculating the taxes and breaking the monthly fees down as they may encourage people to look for a home elsewhere. Remember that the UK’s average rental price is almost £1,000, with London exceeding the figure by over £600. Could you afford to fork out that amount of money each month and still pay an extra £150 in council tax?
The best locations are non-negotiable. Thankfully, this doesn’t matter too much since people are happy to pay more to live in nicer areas. But, it’s when the region doesn’t match the tax bracket where you should be careful. The last thing you want to do is pitch in as it takes away from your bottom line.
Be sure to research the council tax band and any other taxes you may be liable to cover.
The Neighbourhood
The neighbourhood in which you purchase and rent out a property will dictate the people who apply to be tenants. Often, landlords see candidates as equals as it’s a healthy problem to have to pick between applicants. In reality, every individual, couple, or family who wants to live in your rental will have pros and cons.
Your job is to decide whether the pros outweigh the cons. For example, a house or flat in a university town or city will attract students. As a result, you could have to worry about the potential for rent arrears and the need for a guarantor. Not only that, but you’ll likely have a gap in the summer when the students move back to their childhood homes.
However, more professional neighbourhoods are less likely to leave you with the same issues. Canary Wharf apartments are sought after by businesses and individuals alike, so the demand will be high all year round. Plus, London is an extremely wealthy region, which means people should be able to pay the increased rent.
Of course, the only issue is raising funds to secure a flat in this location. Yet, if you can, it won’t take long for the property to start turning a profit.
Disaster-proof
As 2020 has highlighted, disasters can come in all shapes and sizes! The most common is a natural disaster, which is mainly flooding in the United Kingdom. Thanks to the amount of rainfall per year, low-lying regions are subject to standing water that can flow directly into your property. More and more tenants check the risk of flooding before signing, which is why an above-ground flat or a house on an incline is essential.
Covid-19 has been a disaster for millions of people, especially those who own properties. Figuring out how to make money during a time like this is tricky, so all you can do is learn from your previous mistakes. For example, the private lets in areas where the job market remains stable are the best to own right now since renters still have a source of income and can pay their arrears.
Also, the locations where limitations are loose are profitable too. This is because people will rent if they believe that they won’t be subject to further restrictions and can use the amenities freely, unlike in other areas of the country.
In many ways, you have to be lucky to land a completely disaster-proof rental. Still, it’s wise to think about the job market and flooding.
The Owner
You. Yes, you. A healthy relationship with a tenant goes a long way to encourage them to stay for the long-term. Why? It’s due to the fact that flexible and understanding landlords are hard to come by, especially ones with incredible properties, so most people won’t take a risk and move.
How you act doesn’t have to go above and beyond the scope of your responsibilities, either. For instance, providing people with contact details and responding to their queries quickly will always be well-received. The same goes for making small tweaks to suit their requirements. If they want to move the rent day to the middle or end of the month, don’t dismiss it out of hand if it doesn’t impact you.
There is a stigma with landlords that you should try hard to evade. Otherwise, you may find that the tenant turnover rate will be high, and that’s when owners struggle to plug the gaps.
Every town, city, and region has good and bad opportunities. Like any investor, you must do your research and negate the potential hazards before putting pen to paper.
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